This paper presents the economics of Bitcoin from a libertarian point of view. The theoretical part analyses the applicability of the Austrian School of Economics at Bitcoin. Of particular interest are the evolution of money, competition among media of exchange, and the concept of money supply. The empirical part analyses the following variables: price, price volatility, liquidity, visibility and velocity.

The author comes to the conclusion that, theoretically, Bitcoin can be closer to the Austrian ideal of money than either money or gold, and it is possible that it will evolve into that position. The results of the empirical analysis are consistent with Bitcoin being a medium of exchange.

By reading this research about Bitcoin economics, you’ll discover that Bitcoin can, hypothetically, eventually evolve into money through the behaviour of market actors. It can also, hypothetically, gain the functions of store of value and unit of account (assuming it does not have them already). Currently, there are areas where Bitcoin has a comparative advantage over other media of exchange, mainly through the reduction of transaction costs in the narrower sense. The existence of this comparative advantage probably means that the critical mass for the network has been reached and at this level, the Bitcoin ecosystem is self-sustaining.

Want to know more about the economics of Bitcoin? Be sure to read this theoretical analysis!