Home
/
RELIGION & LIBERTY ONLINE
/
A cryptocurrency? Tech stock? Bubble? What exactly has Bitcoin become?
A cryptocurrency? Tech stock? Bubble? What exactly has Bitcoin become?
Apr 8, 2025 11:39 PM

Four years ago I wrote a series of posts on what Christians should know about bitcoin. At the time a single bitcoin was worth $266, and I wasn’t sure it’d be around for five more years. This week a single bitcoin was trading for $17,800 and it looks like it’ll be around long past my five-year mark. But the rapid and inexplicable rise in price of bitcoins has caused some people to wonder what’s going on—and even e confused what bitcoin is anymore. What is bitcoin nowadays? Here are a few possible answers.

Is bitcoin still a cryptocurrency?

Not really. Bitcoin has e the most popular mainstream cryptocurrency by ceasing to be a form of currency. Sure, you can still technically buy some goods and services with bitcoin. But because it is prone to deflation you’d be foolish to do so.

Deflation, a decline in the general price level, occurs when the price of goods and services decline relative to a specific measure. The value of the goods and services themselves do not have to decline for deflation to occur; all that is required is for the value of the currency itself to increase. This is exactly what has occurred for the entire existence of bitcoin.

Because of its deflationary nature, bitcoin is a terrible form of currency. For example, in 2010, a developer named Laszlo Hanyecz traded 10,000 bitcoins for two Papa John’s pizzas. At the time the bitcoins were worth about $40. Today, those coins would be worth $1.7 million dollars. Anyone who bought anything with bitcoins prior to 2017 is likely regretting their purchase.

It bitcoin a tech stock?

Definitely not. There are several ways that stocks are valued, but most of them are based on the assumption that the pany has or will have future earnings which will either justify the rise in price or will lead to a distribution of dividends to shareholders.

While bitcoin sometimes acts like a stock (i.e., it can be traded on exchanges, is subject to technical analysis, etc.), there is pany underlying bitcoins—only a blockchain. Bitcoin will also never have earnings, though it currently pays out a form of “dividend” to bitcoin miners (see my previous series for more on how bitcoin works).

Is bitcoin the “new gold”?

Bitcoin is like Gold 2.0, says Tyler Winklevoss.

No, it’s not. While bitcoin appeals to many of the same people who once preferred gold as an investment vehicle, bitcoin has few similarities to the precious metal. For starters, bitcoin is a pure “fiat currency” similar to the U.S. dollar. Gold modity money. Gold is also an actual physical asset that has some use for real-world applications. Bitcoin is an intangible asset whose monetary value is solely dependent on how much hard currency people are willing to exchange for it.

Additionally, gold has the advantage of being a long-term illusion: gold is valuable because for thousands of years we humans have convinced ourselves that gold is valuable. Bitcoin and other cryptocurrencies have a long way to go before they can create a similar “money delusion.”

Is bitcoin a wealth redistribution system?

Yes, it is. The question is what type of wealth redistribution system. The most generous take is that similar to Valentin Schmid, who contends that bitcoin “favors risk takers, innovators, savers, and people who are curious and persistent enough to learn new technology as well as history.” Those people, who jumped on the bitcoin train early enough “will be richly rewarded and their purchasing power will increase.”

That’s certainly true to some extent, since 40 percent of bitcoin is held by about 1,000 people. As the price of bitcoin increases, the value of the holdings of these early movers is rising almost exponentially. The key for them is when to unload bitcoins for hard currency and collect the wealth that has been accumulating to them. When they do (and they can even collude together on the timing since bitcoin isn’t subject to financial regulations) the bitcoins held by the late movers will be worth much, much less than they bought them for.

Another, less congenial, term for this is a ponzi scheme. The price of bitcoin is currently rising based solely on the idea that the price will rise even further. And as long as there are “greater fools” to bid up the price of the cryptocurrency, the price will continue rise. Eventually, though, when there are no more fools left, the bubble will pop—and thousands of people will have lost real money.

Is bitcoin a speculative bubble?

Yes, almost assuredly. Financial bubbles involve outsized growth in the price of an asset beyond its true value. Bitcoin has no intrinsic value so why do people hold it as an asset? Because they think it can be sold an even higher price in the future (see: greater fool theory). As economist John Cochrane explains:

[I]f the price [of an asset] is greater than zero, either people see some “dividend,” some value in holding the asset, beyond its cash payments; equivalently they are willing to hold the asset despite a lower expected return going forward, or they think the price will keep going up forever, so that price appreciation alone provides petitive return. The first two are called “convenience yield,” the latter is a “rational bubble.”

“Rational bubbles” are intriguing, but I think fundamentally flawed. If a price goes up forever, eventually the value of bitcoin must exceed all of US wealth, then all of world wealth, then all of interplanetary wealth, then all of the atoms in the universe. The “greater fool” or Ponzi scheme theory must break down at some point, or rely on an irrational belief in the next fool. The rational bubbles theory also does not account for the association of price surges with high volatility and high trading volume.

The fact that bitcoin is a speculative bubble, though, does not mean that it will pop anytime soon. As long as the people who hold the most coins—the “bitcoin whales”—think there are greater fools who will bid up the price, the bubble is likely to last a long time.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Australian PM Tony Abbott: Private Virtue vs. Public Duty
On Saturday, Tony Abbott, a member of the Liberal-National Coalition, was elected prime minister of Australia despite being considered “too religious, too conservative and too blunt” to win a national election. Turns out, he’s an admirer of the work of Acton Research Director Samuel Gregg (Australian born). In 2001, Abbott addressed the role of government in alleviating poverty and reducing unemployment in an issue of Policy Magazine, in a special feature titled, “Against the Prodigal State.” He begins: The story...
The Federal Government Attacks Louisiana School Choice
Last week, as the country was remember MLK’s dream of children being judged on the content of their character rather than the color of their skin, Attorney General Eric Holder was suing the state of Louisiana because he’s more worried, as the Wall Street Journal says, about plexion of the schools’ student body than their manifest failure to educate. Late last week, Justice asked a federal court to stop 34 school districts in the Pelican State from handing out private-school...
The Camel’s Hump: Rudyard Kipling on Idleness and Hard Work
The other night, I sat down with my kids to read one of my favorite Rudyard Kipling poems, “The Camel’s Hump,”a remarkable 19th-century takedown of 21st-century couch-potato culture. With typical color and wit, Kipling takes aim at idleness, decrying “the hump we get from having too little to do” — “the hump that is black and blue.”Kipling proceeds to elevate labor, noting that hard work refreshes the soul and reinvigorates the spirit: “The cure for this ill is not to...
Is de Blasio The New Left?
Peter Beinart at the Daily Beast writes a fascinating article about the way the “left” is currently being reshaped. It seems that young adults in the Democratic Party are far more radical than what America saw in the Clinton White House. In fact, as the article notes, Bill de Blasio’s Democratic Party nomination to run for New York City mayor is a signal of this new direction. If those who love liberty are not paying attention to this shift, they...
Callings and the childfree life
I share Fr. Robert Barron’s concern about many of the attitudes on display in this Time magazine cover story on “the childfree life.” As Barron writes, much of the problem stems from the basic American attitude toward a life of “having it all.” Thus, Barron observes, “Whereas in one phase of the feminist movement, ‘having it all’ meant that a woman should be able to both pursue a career and raise a family, now it apparently means a relationship and...
Quebec Ponders Banning Public Employees From Wearing Overt Religious Symbols
Parti Québécois and Bernard Drainville, minister of the newly proposed charter, announced yesterday that a new plan would ban overt religious symbols to be worn by “judges, police, prosecutors, public daycare workers, teachers, school employees, hospital workers and municipal personnel.” These symbols would include large crosses or crucifixes, turbans, hijab, and kippas. Smaller jewelry (such as Star of David earrings) would be allowed. This proposal has caused uproar, both in the Quebec government and in the public. Here are a...
Commentary: Federal Student Loans as a Problem of Subsidiarity
“When loans are guaranteed by the state and detached from market forces and personal responsibility,” says Dylan Pahman in this week’s Acton Commentary, “those institutions being paid with that loan money experience inflated demand as everyone and anyone now can go and wants to go college. As a result, tuition prices have been inflated. The full text of his essay follows. Subscribe to the free, weekly Acton News & Commentary and other publications here. Federal Student Loans: A Problem of...
5 Lessons Learned from 10 Years at the Acton Institute
Jordan J. Ballor has spent the past decade working for the Acton Institute. At Fieldnotes Magazine he share five lessons he’s learned from working at a think tank focused on the intersection of theology and economics: 1. Treat people like people. The Golden Rule, “do to others what you would have them do to you” (Matt. 7:12), may seem mon sense, but it is much more mon to see what it really should look like in practice. I experienced this...
The End of Anthony Weiner’s Sad and Pathetic Lust for Political Power?
Anthony Weiner did not win the Democratic Party primary for New York City last night. Leading in the polls at one time, he ended up with 5 percent of the vote. His defiant and circus like campaign appropriately ended with more bizarre theatrics. In a scolding interview, Weiner was called out for his political power addiction recently by Lawrence O’Donnell of MSNBC. Though O’Donnell sees no need to call him out for his moral behavior and personally he doesn’t feel...
What You Need to Know About Wilhelm Röpke
Wilhelm Röpke is one of the most important 20th century economists that almost no Americans know anything about. To really learn about the man whose influence was considered largely responsible for enabling Germany’s post-World War II economic “miracle,” you should read Samuel Gregg’s Wilhelm Ropke’s Political Economy. But if you don’t have the time (or $109.25) to spend, you can read Ralph Ancil’s introductory article at Front Porch Republic: Throughout his professional life Röpke was concerned about a socially and...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved