The rise of Bitcoin against the U.S. dollar has stirred global attention, especially after the shift it created in the lives of some middle-class individuals who became wealthy through recent investment. It has therefore become the aspiration of many investors seeking enormous gains from Bitcoin. Questions abound regarding the viability of investing in Bitcoin and whether it is truly a bubble that may burst at any moment. But before answering that question, it is more important to understand what Bitcoin is and how it emerged, so that we may see and interpret the picture correctly.

Satoshi Nakamoto

In 2008, Satoshi Nakamoto published a paper explaining how the Bitcoin financial system could be programmed. The idea was that a person would have an account number without a name or detailed personal information, through which a specified number of bitcoins could be transferred to another account number by means of an intermediary responsible for completing the process. Automatically, all intermediaries around the world would be informed that this account had transferred a specified number of bitcoins to the other account. What we notice here is that the process preserves data across all parties in a decentralized manner. When all transactions are gathered for clearing, we arrive at a total that cannot be reduced, due to a complex algorithm. Publishing this paper meant that people could play the role of intermediary, and through wallets, they could purchase Bitcoin after completing payment and begin trading it through buying and selling.

Bitcoin in Latin America

The rise in Bitcoin’s value began because many people in Latin America do not trust their governments or the currencies they print, due to the increase in commodity prices caused by state policies of printing more money, regardless of the effort whose value is lost when the currency meant to preserve that effort declines. Such individuals therefore turn to buying Bitcoin.

The number of bitcoins at the present time is 16 million, increasing until it reaches its maximum estimated supply of 21 million in 2140. The increase distributed over time goes to server operators who process transactions between Bitcoin traders. They receive fees from what enters the market, and each year a number of bitcoins is distributed among them. In 2014, the increase received by server operators from Bitcoin was lower than the electricity cost spent on those servers. But does Bitcoin’s price today cover that cost?

Bitcoin and Gold

Bitcoin is a tool, or medium, used in buying and selling — as a price. You cannot wear Bitcoin as you do gold. It is not a consumer commodity that can be used for another purpose. Rather, it is the instrument through which a car or a house is valued in a specified number of bitcoins. One may say, for example, that the value of this house is 25 bitcoins, and so on. Notice that Bitcoin resembles gold in its scarcity, yet in my view Bitcoin surpasses gold in that respect, because we cannot search the entire earth to determine the total amount of gold within it, whereas we know with certainty that the number of bitcoins in the world will reach 21 million by 2140.

The Legitimacy of Bitcoin

For Bitcoin to become an approved medium of exchange, it must possess legitimacy and be recognized by governments, allowing it to be traded in exchange for goods. When speaking of governments, it is no secret that they hold authority over monetary policy — paper money, or fiat money — through policies that depend on increasing or reducing the money supply in relation to rising or stable production. This grants governments power through which they manage their countries. Are governments prepared to recognize the legitimacy of Bitcoin, which would threaten the authority they derive from their own currencies, and thereby cause them to lose that authority?

If we assume that the United States operates under a capitalist system, then the mere existence of a person who owns one million bitcoins would make the government unable to control the country’s economy in the face of what that person owns, since he would possess a source of money managed globally through the Bitcoin system. The issue therefore concerns the threat that recognition of Bitcoin would pose to state policy. The existence of a small number of shops that buy and sell using Bitcoin does not make a meaningful difference. But if 50% to 80% of all stores across the various U.S. states were to accept Bitcoin, then, and only then, would this begin to affect state policy.

Is Bitcoin a Bubble?

It cannot be assumed that the volatility in Bitcoin’s value over previous years means that it is a bubble. As noted, Bitcoin is considered a currency whose value could, in theory, rise indefinitely. Its increases and declines are justifiable so long as they are determined by supply and demand and by the political and economic conditions surrounding it. In 2013, its value reached $200, then fell to $100, causing significant losses for a small number of investors. In 2015, its value returned to $200. By late 2016, it had reached $1,000, and by today it has reached $19,000. There is no doubt that we are amazed by the success stories of investors who believed in it and realized profits from investing when it was valued at $5 compared with its value today.

The question remains: will Bitcoin’s value decrease or increase in the near future? If we measure by previous data, Bitcoin was worth $200 in 2013, and at the time we considered that price excessive. It then rose to $1,000, fell to below $200, and later reached $19,000. It may reach $50,000 after a year, or it may fall to $400. This is something we do not know how to predict, because it is connected to many factors, one of which is the extent to which Bitcoin gains legitimacy. If central banks were to agree and announce that Bitcoin is the next currency under specific laws, such an announcement would create a positive shift and raise Bitcoin’s value. The opposite is also true.

A Primary Currency...!

At the general level, I believe — theoretically — that Bitcoin is qualified to become a primary currency, because its properties are close to those of gold. It cannot produce a sharp rise in inflation, or the opposite, based on external policies, since a person’s effort is stored in this money as value. If money were Bitcoin, a person’s effort would not be lost, due to the fixed scarcity of Bitcoin, which rises in line with increased production and buying and selling activity, as is the case with gold — indeed, perhaps better. Will Bitcoin witness a moment in which political viability grants it a place as the future of the financial system? Why not?

How does the factor of revenues change the understanding of scarcity and trust in money?

Scarcity protects trust when it is clear and credible, while undisciplined expansion needs strong institutions to prevent value from eroding. From the angle of revenues, the issue is not measured by its label alone, but by the measurable effect it leaves behind.

How does the factor of revenues change the understanding of the value of money?

Money’s value comes from its ability to preserve benefit, enable exchange, and represent trust, not merely from its form or name. From the angle of revenues, the issue is not measured by its label alone, but by the measurable effect it leaves behind.

How does the factor of revenues change the understanding of price and value?

Confusing price with value traps judgment in the visible number, while value is tied to benefit and the ability to preserve purchasing power. From the angle of revenues, the issue is not measured by its label alone, but by the measurable effect it leaves behind.

How does Bitcoin scarcity, legitimacy, and volatility affect the economy?

Its effect appears in how costs, incentives, and resources are managed, and in the economy's ability to turn decisions into sustainable value. The direct context is to Bitcoin, its scarcity, political legitimacy, price volatility, and its theoretical potential as a future primary currency.