114,131.88
+1.29%
Although Bitcoin doesn't generate cash flows like companies, isn't backed by physical reserves like gold, and isn't guaranteed by any central authority... its market value reaches hundreds of billions! How does this happen?
Professor Andrew Urquhart (Birmingham Business School) provides an answer based on recent academic literature š
---
1ļøā£ Scarcity and Monetary Policy
š Bitcoin has a limited supply: only 21 million.
This makes it similar to gold, and it is viewed as a hedge against inflation in light of global excessive money printing.
The Stock-to-Flow model explains the price historically well.
Studies such as (Pagnotta & Buraschi 2018) and (Kruger et al. 2022) have emphasized the importance of scarcity in supporting value.
---
2ļøā£ Network Effect and Actual Usage
š± The more users, the greater the value of the network.
According to the Tokenomics model, building trust and dependence generates increasing value.
Users' expectations that "others will accept Bitcoin" enhance stability.
The network gains strength from collective faith and daily dependence.
---
3ļøā£ Production Costs and Network Security
š” Mining (Proof-of-Work) consumes real-world energy and resources.
This creates a "price floor" below which the price typically does not decline.
Studies such as (Hayes 2015) show that Bitcoin rarely trades below the cost of mining.
Network security plays a pivotal role in the asset's value.
---
4ļøā£ Speculation, Sentiment, and Media Attention
š Price is strongly influenced by media coverage, searches, and social media attention.
Studies by (Urquhart 2018) and (Shen et al. 2019) have demonstrated a strong correlation between public interest and price.
---
5ļøā£ The Macroeconomic Role
š¦ Amid low interest rates and fears of the erosion of fiat currencies, Bitcoin has become a non-sovereign haven.
Studies by Baur et al. (2018) and Jahanshahloo et al. (2025) have shown that many investors hold Bitcoin for long periods.
However, it remains more of a speculative instrument than an actual safe
