Bitcoin’s value proposition: shorting expansionary monetary policies

Thibaut Morillon

Studies in Economics and Finance, 2021, vol. 39, issue 1, 20-44

Abstract: Purpose - Professionals and academics alike hold polarized opinions about Bitcoin’s purpose and its fundamental value. This paper aims to describe Bitcoin’s unique features that make it such an intriguing asset and proposes a new way to consider Bitcoin and its underlying value. Design/methodology/approach - In this paper the author discusses Bitcoin’s defining features that make it a unique asset. The author argues that Bitcoin should not be considered as a single purpose asset only, but rather as a new digital financial asset serving several functions, at least partially. The author discusses the role of Bitcoin in the traditional financial system, contrasts Bitcoin to gold, considers the implications of the continuance of expansionary policies on Bitcoin and discusses the impact of the emergence of cryptocurrencies as a new asset class on public policies. Findings - In addition to functioning as a means of payment (at least partially) and a diversification tool, part of Bitcoin’s value proposition stems from its worth as a short position on modern expansionary monetary policies. Indeed, Bitcoin’s value should rise if expansionary monetary policies are maintained, amounting to a tool to short these policies, which should be considered in future attempts to value Bitcoin. Originality/value - The author adds a new layer to the ongoing thought process by arguing of a function played by Bitcoin unaccounted for thus far by the literature. Additionally, the author describes the features and mechanisms, allowing Bitcoin to play that role.

Keywords: Bitcoin; Monetary policy; Cryptocurrency; Expansionary policies (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:sef-03-2021-0107

DOI: 10.1108/SEF-03-2021-0107

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