The Distributional Consequences of Bitcoin

This article is available in French.

Summary and counterpoints on the document “The distributional consequences of Bitcoin” (Bindseil & Schaaf, 2024) inspired by the video (in French)“🔥 Europe capitulates against Bitcoin!”.

---

🔗Context and Objective

The document analyzes the distributional consequences of a scenario in which the price of Bitcoin continues to rise over time. Contrary to Satoshi Nakamoto’s (2008) initial promise to create a better global means of payment, Bitcoin is today mainly considered a speculative investment asset. The authors focus on the macroeconomic and redistributive impacts of a “positive” scenario for Bitcoin, i.e. a continuous price increase.

Counterpoint:
It is inaccurate to claim that Nakamoto’s promise has not been fulfilled: Bitcoin has already revolutionized the notion of independent digital money, offering an alternative to centralized systems.
Even though the use as a universal medium of payment is progressing slowly, the role of store of value and protection against global monetary devaluation is at the core of the Bitcoin innovation (in French). Speculative investment is not a diversion, but a phase in the adoption of disruptive technology. Network effects and volatility are typical for the early stages of any new asset class.

🔗Bitcoin: Uses, Valuation, and Investment Narrative

• Limited real-world usage: Bitcoin has never been widely adopted for legal payments, even in countries that have recognized it as an official currency (e.g., El Salvador).

Counterpoint:
Adoption of a new currency takes time, especially when facing competition from national currencies, regulation, and institutional mistrust.
The El Salvador example is caricatural: infrastructure, education, and political resistance are obstacles, but the technical possibility exists and progress is real, especially for remittances and in underbanked countries (in French).
Moreover, Bitcoin is already used to bypass financial censorship and protect privacy, which is a fundamental use case.

• Valuation issue: Unlike traditional assets (stocks, bonds, real estate), Bitcoin generates no cash flow, making any “fundamental” valuation impossible.

Counterpoint:
The absence of cash flow does not preclude value, as gold has demonstrated for millennia.
Bitcoin derives its value from the security of the BTC network, its absolute scarcity (21 million units), its portability, and its unalterable nature. Traditional valuation models are ill-suited for an emerging monetary asset. The demand for an apolitical and non-inflationary asset justifies a “monetary premium” independent of cash flow.

• Investment narrative: Increasingly, public figures and investors (Larry Fink, Cathie Wood, Michael Saylor…) defend Bitcoin as “digital gold”, betting on its limited supply and growing demand, but without connection to real economic utility.

Counterpoint:
Bitcoin’s economic utility goes far beyond mere speculation: it offers protection against confiscation, hyperinflation, and enables international transfers without intermediaries.
The comparison with gold is indeed relevant, but Bitcoin surpasses gold in divisibility, portability, and transparency. Furthermore, growing institutional demand shows that sophisticated actors see macroeconomic and strategic utility in holding Bitcoin.

🔗Macroeconomic Implications of Asset Bubbles

• The authors distinguish cases where an asset’s value rise is accompanied by increased productivity (technological innovation), from those that only reflect a speculative bubble.

Counterpoint:
Innovation is not always measurable by immediate productivity gains.
Bitcoin innovates in trust, monetary sovereignty, and digital security—factors that do not directly show up in traditional productivity statistics but have a profound societal impact. The analogy to a bubble neglects the creation of a new global economic ecosystem.

• In the case of Bitcoin, the value increase is not accompanied by any increase in the productive potential of the economy: thus, it is “wealth” creation that does not correspond to real wealth creation.

Counterpoint:
Economic “productive potential” is not the only progress criterion.
Bitcoin improves global access to store of value, lowers international transfer costs, secures savings from sovereign risks, and stimulates the development of alternative financial services (DeFi, Lightning Network, etc.). These effects are real, even if not reflected in traditional GDP.

• Central banks, in such a scenario, could limit the inflationary effect by tightening monetary policy, but this does not compensate for the redistributive aspect.

Counterpoint:
Inflationary effects are a result of money printing, not Bitcoin.
Bitcoin acts as a thermometer, revealing the loss of purchasing power in fiat currencies, and offers an alternative that encourages central banks to act more responsibly. Moreover, redistribution linked to Bitcoin is voluntary: no one is forced to buy or sell.

🔗Distributional Consequences of a Bullish Bitcoin

• Enrichment effect: Early holders (“early birds”) fully benefit from the price increase, selling gradually to “latecomers”.

Counterpoint:
This is true for any emerging asset: initial risk is rewarded. Early birds assumed enormous technological, legal, and reputational risks.
Moreover, Bitcoin’s distribution is broader and more transparent than traditional monetary issuance, which often benefits those closest to central banks (the “Cantillon Effect”).

• Impoverishment effect: This increased consumption by early holders necessarily comes at the expense of the rest of society, whose consumption or savings are compressed, since the “wealth” created by Bitcoin does not increase real production.

Counterpoint:
There is no “zero-sum” game here: Bitcoin’s rise results from a voluntary transfer of savings to an asset considered safer or more promising.
Those who choose not to participate are not impoverished, unless their currency is devalued, which is the result of inflationary monetary policies. Bitcoin offers protection against such devaluation.

• Simulation: A simple model shows that, even without a bubble bursting, a continuous price rise generates a lasting transfer of wealth from new entrants and non-holders to early investors.

Counterpoint:
Models are reductive: in reality, adoption creates value for all users, as with any network technology.
Moreover, Bitcoin’s distribution widens over time, and the incentive to join early rewards initiative. Latecomers benefit from a more secure, liquid, and user-friendly network.

• Impact on social cohesion: These redistributive effects could increase inequality and social division, without any overall economic benefit.

Counterpoint:
Bitcoin offers everyone, without discrimination, the possibility to access an open, neutral financial system.
It reduces dependence on failing states and empowers individuals. Inequality often stems from differences in access to information and willingness to take risks: Bitcoin democratizes this access.

🔗The Role of Politics and Regulators

• Bitcoin’s fate depends heavily on the political and regulatory context: ETF approvals, legal recognition, active crypto industry lobbying, and its weight in US electoral debates.

Counterpoint:
Despite regulatory uncertainty, Bitcoin has withstood all attempts at obstruction for 15 years.
Its decentralized nature ensures resilience. Institutional and political interest shows the sector’s maturity. The emergence of a democratic debate around Bitcoin is evidence of its relevance, not a weakness.

• The authors argue that pro-Bitcoin policies favor redistribution toward early adopters, to the detriment of non-holders and late entrants.

Counterpoint:
On the contrary, pro-Bitcoin policies promote financial inclusion, competition, and individual freedom. Those who become informed and act early are rightly rewarded; those who delay or refuse adoption can still participate at any time, on equal terms, with no entry barriers. Traditional monetary redistribution is opaque and favors system insiders.

🔗Conclusion

• Even in a scenario where the Bitcoin bubble never “bursts,” a continuous price increase inevitably results in a redistribution of wealth and purchasing power to early holders, at the expense of the rest of society, without creating economic value.

Counterpoint:
Economic value creation is not limited to material production: Bitcoin creates value by securing savings, granting access to monetary freedom, and stimulating financial innovation. Early adopters took significant risks and helped build a global ecosystem; their reward is not an injustice, but the natural consequence of radical innovation.

• Bitcoin promoters as an investment neglect or hide this redistributive effect.

Counterpoint:
Redistribution is inherent to all innovation (internet, mobile, etc.) and is neither hidden nor immoral. It encourages risk-taking, curiosity, and self-education—virtues, not vices.

• According to the authors, this phenomenon could undermine social cohesion and democracy if policymakers ignore the fundamentally redistributive nature of Bitcoin’s price rise.

Counterpoint:
Bitcoin is a tool for emancipation and cohesion, especially in contexts of financial repression, hyperinflation, or political instability. It allows anyone to participate in a fair, open system, free from discrimination of origin, gender, or status. It strengthens democracy by reducing state power over money.