Austrian Economists’ Guide to Bitcoin
Because of uncertainty, people acquire goods for the purpose of indirect exchange, which we call a MoE. We call the most marketable MoE, money.
Bitcoin is a MoE, but it is not in most contexts the most marketable, so we wouldn’t call it “money.” However, bitcoin is a very marketable MoE, so we can call it a secondary MoE.
It has grown as a secondary MoE because of a growing exchange and reservation demand based on its scarcity, durability, transportability, low storage costs, etc. The increased liquidity has a positive feedback loop of making it even more desirable as a MoE.
As this demand grows, we could see more people adopting bitcoin as a treasury asset, demanding it as payment, and spending it to acquire other goods. In time, it could even displace the USD as the most marketable MoE.
At that time, bitcoin would be money.
On the Secondary Media of Exchange
Read Mises’ Human Action, Chapter XVII, Section 17.revisit
- “To ignore secondary media of exchange is to effectively believe we are in the ERE/general equilibrium (of course, money wouldn’t even be needed then), because it assumes that the current money will just remain the most marketable MoE.”
- “As I pointed out before, someone could make an entrepreneurial error if the good they thought would make a good MoE turns out to be useless, but it’s still a MoE. They acquired the good for that purpose.”