Further Reading: Bitcoin's Economic Model

Essential Sources

The Fixed Supply and Halving Mechanism

  • Nakamoto, S. (2008). "Bitcoin: A Peer-to-Peer Electronic Cash System." The original whitepaper. Section 6 describes the incentive structure and the coin issuance schedule. Available at bitcoin.org/bitcoin.pdf.

  • Bitcoin Core Source Code: validation.cpp, function GetBlockSubsidy(). The actual code that enforces the supply schedule and halving. Reading the source is the most authoritative reference. Available at github.com/bitcoin/bitcoin.

  • Lerner, S. D. (2013). "The Well Deserved Fortune of Satoshi Nakamoto." Sergio Demian Lerner's nonce analysis identifying the approximately 1.1 million BTC mined by an entity believed to be Satoshi. Establishes the largest single block of "lost" or dormant coins. Available at bitslog.com.

Stock-to-Flow Model and Critiques

  • PlanB (2019). "Modeling Bitcoin's Value with Scarcity." The original Medium article introducing the stock-to-flow model to Bitcoin analysis. Essential reading for understanding the model's claims, methodology, and the data it was built on. Available at medium.com/@100trillionUSD.

  • PlanB (2020). "Bitcoin Stock-to-Flow Cross Asset Model (S2FX)." The expanded model that incorporates gold and silver as data points. Represents the model's most ambitious claims. Available at medium.com/@100trillionUSD.

  • Cordeiro, N. (2020). "Falsifying Stock-to-Flow as a Model of Bitcoin Value." Strix Leviathan's statistical critique demonstrating the model's wide confidence intervals and methodological issues. One of the most rigorous bear-case analyses of S2F. Available at strixleviathan.com.

  • Burger, M. (2020). "Reviewing 'Modeling Bitcoin's Value with Scarcity.'" Marcel Burger's cointegration analysis showing that the apparent R-squared in the S2F model is an artifact of non-stationary data. Essential for understanding why high R-squared values can be misleading. Available at medium.com/@marcelburger.

The Digital Gold Thesis

  • Ammous, S. (2018). The Bitcoin Standard: The Decentralized Alternative to Central Banking. Wiley. The most comprehensive book-length argument for Bitcoin as sound money and digital gold. Ammous traces the history of monetary systems and argues that Bitcoin's fixed supply makes it superior to both fiat currency and gold. Essential reading for the bull case, though readers should note the author's explicit advocacy.

  • Gladstein, A. (2022). Check Your Financial Privilege: Inside the Global Financial System. BTC Media. Alex Gladstein of the Human Rights Foundation makes the case for Bitcoin's utility in the developing world, particularly for citizens under authoritarian regimes. Provides important context for the censorship-resistance argument.

  • Taleb, N. N. (2021). "Bitcoin, Currencies, and Fragility." Nassim Taleb's paper arguing against Bitcoin as a store of value, reversing his earlier positive assessment. Taleb argues that Bitcoin requires continuous interest to maintain value and is not truly an inflation hedge. A strong articulation of the bear case from a respected quantitative thinker. Available at arxiv.org.

Institutional Adoption

  • Saylor, M. (2020-present). MicroStrategy earnings calls and Bitcoin strategy presentations. Michael Saylor's articulation of the corporate treasury thesis. Available via MicroStrategy's investor relations page and numerous recorded conference presentations.

  • U.S. Securities and Exchange Commission (2024). "Statement on the Approval of Spot Bitcoin Exchange-Traded Products." SEC Chair Gary Gensler's statement accompanying the ETF approval, which explicitly notes that the approval does not constitute an endorsement of Bitcoin. Available at sec.gov.

  • BlackRock (2023). "Bitcoin: A Unique Diversifier." BlackRock's internal research paper on Bitcoin's portfolio characteristics, published ahead of the IBIT launch. Provides the institutional bull case for Bitcoin allocation from the world's largest asset manager.

  • Bukele, N. et al. (2021-present). El Salvador Bitcoin Law and subsequent amendments. Primary source documents for the first national Bitcoin adoption experiment. Available via El Salvador government publications and IMF reports.

Volatility and Risk Analysis

  • Baur, D. G., and Dimpfl, T. (2021). "The Volatility of Bitcoin and Its Role as a Medium of Exchange and a Store of Value." Empirical Economics, 61, 2663-2683. Academic analysis of Bitcoin's volatility characteristics and their implications for its monetary functions. Finds that Bitcoin's volatility is inconsistent with store-of-value classification by traditional standards.

  • Liu, Y., and Tsyvinski, A. (2021). "Risks and Returns of Cryptocurrency." Review of Financial Studies, 34(6), 2689-2727. Yale economists' analysis of cryptocurrency risk-return characteristics. One of the more rigorous academic treatments of Bitcoin as an asset class.

  • Yermack, D. (2015). "Is Bitcoin a Real Currency? An Economic Appraisal." Handbook of Digital Currency, 31-43. Early academic assessment concluding that Bitcoin's volatility disqualifies it as a currency. Useful as a baseline for evaluating how Bitcoin's volatility has evolved since publication.

Adoption Metrics

  • Glassnode Insights. On-chain analytics provider publishing regular analyses of Bitcoin network metrics, including active addresses, hash rate, exchange flows, and holder behavior. The most comprehensive free source of on-chain data analysis. Available at insights.glassnode.com.

  • Chainalysis Reports. Annual "Geography of Cryptocurrency" and "Crypto Crime" reports providing data on Bitcoin adoption by region, use case, and transaction type. Available at chainalysis.com.

  • Cambridge Centre for Alternative Finance. "Cambridge Bitcoin Electricity Consumption Index (CBECI)." The most widely cited estimate of Bitcoin's energy consumption, maintained by Cambridge University. Provides real-time estimates and historical data. Available at cbeci.org.

Advanced and Supplementary Sources

Economic Theory

  • Selgin, G. (2015). "Synthetic Commodity Money." Journal of Financial Stability, 17, 92-99. George Selgin's framework for understanding Bitcoin as a new category of money — neither commodity money (like gold) nor fiat money (like the dollar), but a "synthetic commodity" with a supply schedule determined algorithmically rather than by market forces or policy.

  • Schilling, L., and Uhlig, H. (2019). "Some Simple Bitcoin Economics." Journal of Monetary Economics, 106, 16-26. A formal economic model of Bitcoin's price dynamics. Demonstrates that in a rational expectations framework, Bitcoin's price must either appreciate toward infinity or collapse to zero — there is no stable equilibrium.

  • Huberman, G., Leshno, J., and Moallemi, C. (2021). "Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin Payment System." Review of Economic Studies, 88(6), 3011-3040. Columbia Business School economists' analysis of Bitcoin's transaction fee market and its implications for long-term network security.

Historical Context

  • Eichengreen, B. (2019). Globalizing Capital: A History of the International Monetary System. 3rd ed. Princeton University Press. Provides essential context for understanding the gold standard, its abandonment, and the monetary history that informs both the bull and bear cases for Bitcoin.

  • Bernstein, P. L. (2000). The Power of Gold: The History of an Obsession. Wiley. Comprehensive history of gold as money. Invaluable for evaluating the digital gold thesis — understanding gold's actual history as a monetary instrument (including its many failures) puts Bitcoin's aspirations in proper context.

Data Sources for Exercises

  • CoinMetrics (coinmetrics.io): Free and paid on-chain data for Bitcoin and other cryptocurrencies. Provides the raw data needed for the quantitative exercises in this chapter.

  • FRED (Federal Reserve Economic Data, fred.stlouisfed.org): M2 money supply, inflation data, gold prices, and other macroeconomic data referenced in the bull case for Bitcoin.

  • Yahoo Finance (finance.yahoo.com): Historical price data for Bitcoin, gold, S&P 500, and other assets used in volatility comparisons.

  • Blockchain.com/explorer: Block explorer with historical data on block rewards, transaction volumes, and network statistics.

For students who want to go deeper on this chapter's topics, we suggest the following order:

  1. Start with the primary sources: Nakamoto whitepaper, PlanB's original S2F article, and the SEC ETF approval statement
  2. Read the strongest bull case: Ammous (The Bitcoin Standard) and Gladstein (Check Your Financial Privilege)
  3. Read the strongest bear case: Taleb's paper and Cordeiro's S2F critique
  4. Engage the academic literature: Selgin, Schilling & Uhlig, and Liu & Tsyvinski
  5. Examine the data: Glassnode, Chainalysis, and CBECI for current metrics

This sequence ensures you encounter each side's strongest arguments before forming your own assessment.