It is worth paying attention when one of the world’s leading macroeconomicists publicly apologizes for underestimating Bitcoin. Ken Rogoff is a horrifying scholar and over the past decade I have learned a lot from my conversations with him, from professors at MIT to designing Libras. He has trained some of the best macroeconomicists on the market. I was fortunate to take the code seriously and persuade some to work with me over the years and help move the space forward.
But in Bitcoin, even after his Mea Culpa, Rogoff is still wrong. And I don’t blame him. What Bitcoin is and represents is an architectural departure from the macro playbooks of recent decades. When I was a junior professor who understood cryptocurrency and was trying to design the MIT Bitcoin experiment, many senior colleagues were worried about abandoning promising academic work about what I saw as a Ponzi scheme. As his Harvard colleague Rebecca Henderson shows in her pioneering work on innovation, the changes that truly challenge the true existing ones are architectural and the surprising structural changes in how the pieces fit. They are hard to grasp that people who are immersed in the status quo will be rejected until they become clear, even if they want.
Bitcoin is one of the architectural innovations in thinking about money and financial infrastructure. That’s why many economists react internally. It goes against much of what they are taught and believe. Textbooks are accepted. Face practices: There are few truly independent central banks and are still less consistent. Treating Bitcoin as a neutral asset and financial infrastructure leads to a true pattern in focus.
Digital Gold Rush
With the Gold Rush, it’s important not to get caught up in a frenzy. You may be selling excavators and may not be able to make any profit regardless of the outcome. But is Bitcoin just a frenzy? After more than 10 years, the answer is no. The simple reason is that Nakamoto Makoto solved a troublesome computer science problem, namely, double spending. Before Bitcoin, digital money needed someone to manage ledgers, which are central banks, financial institutions, or wallet providers. Encryption and IncentivesSatoshi created a rare, difficult to copy, neutral currency.
Bitcoin neutrality is novel. In many cases, compared to gold, its characteristics differ sufficiently to be a category definition. Yes, both are scarce, both have a swing in price and both hold value as society agrees to them. Gold has industrial and gemstone use, but most of its value comes from its role as a valuable store. And while gold has centuries of advantages, as more lives move online, digital native assets like Bitcoin have their own benefits, from spending to custody.
Finally, Bitcoin utilities exceed assets. That network can act as an open, neutral payment layer, especially as scaling technology increases throughput to meet real-world payment demands. What are the neutral forms of digital money and what are the open protocols for moving value?
Unpack Bitcoin prices
The media and crypto community are obsessed with price fluctuations, but on the log scale, much of the drama fades, bringing in more stable trends. That pattern coincides with the spread of innovation along the s curve –Massive By Everett Rogers – new technology works through consecutive segments of recruits.
Bitcoin incubated within a small community of Cypherpunks and developers. As prices rose, a wider group of early adopters was drawn. Consumers and businesses then encompassed it as alternative savings tools, and sometimes as payment railroads, in countries with often unstable currencies. Today, large financial institutions offer it, and sovereigns are increasingly turning their eyes to shape fintech and investment strategies.
This spreading process is combined with a fixed supply of 21 million Bitcoin, which inevitably converts S-Curve into slow, stable price growth. Therefore, regulatory and market uncertainty drives short-term swings, while addressable market expansions over longer periods explain more data.
What is the equilibrium price of Bitcoin? Unknown – And it depends on where we are in the s-curve. Prices can stall if Bitcoin maintains its niche. Once it really becomes mainstream, further exponential growth is possible. Investors model this against gold, payments and card network values, and more. It is also wise to consider the risk that some technical breakthroughs or obstacles will eliminate Bitcoin. Relax, despite the billions raised by alternatives, none of the network effects or institutional acceptance of Bitcoin.
Software as money
As tools for recording debits and credits have evolved, we have our money ideas, from shells and beads to salt, metal, paper notes and, ultimately, to the rise of central bank independence. Through booms and crisis vibration A look back pendulum between the needs of creditors and debtors, between the harder and more flexible money.
Given its history, it is not unreasonable to think that hard, neutral money secured by encryption keys can play a real role in global finance and will likely be what will come next. Like all forms of money before that, Bitcoin has value, so Bitcoin has value. As the consensus grows, its trajectory appears gold. That belief strengthens the “All-in” Bitcoin finance company of “Strategy, Trump Media & Technology Group, and Twenty One” backed by Cantor Fitzgerald, the son of SoftBank, Tether and Commerce Secretary. Their logic: If Bitcoin becomes the ultimate safe haven, as long as it can be, with risky leverage, but as long as it can organize interests and principals in dollars.
However, there is an overturn in the expected value. If, for some reason, society stops believing that Bitcoin will be stored and will purchase future goods and services, its prices could collapse to zero. Fiat currency will fail to reduce Bitcoin as faith in the government’s balance sheet, but other shocks can cause equal loss of trust.
Ironically, reckless, exploited purchases by large Bitcoin-based companies will make sharp market corrections, but should undermine confidence in Bitcoin’s progress along its Survey. Still, fundamental innovation can withstand. As a neutral infrastructure, it is indifferent, reduces costs and creates real economic value – it includes not only regulatory and tax arbitration, but also puzzles worthy of the attention of economists.
