Economists Are Still Puzzled By Bitcoin—Should Anyone Be?
When one of the world’s leading macroeconomists publicly apologizes for underestimating Bitcoin, it’s worth paying attention. Ken Rogoff is a formidable scholar, and over the last decade—from my professor days at MIT to the design of Libra—I’ve learned a great deal from conversations with him. He has trained some of the best macroeconomists in the market, and I was fortunate to persuade a few to take crypto seriously, work with me over the years, and help move the space forward.
But on Bitcoin, even after his mea culpa, Rogoff is still wrong. And I don’t blame him. Much of what Bitcoin is, and represents, is an architectural departure from the macro playbook of recent decades. When I was a junior professor trying to understand cryptocurrencies and designing the MIT Bitcoin experiment, many senior colleagues worried I was throwing away a promising academic career on what they saw as a Ponzi scheme. As his Harvard colleague Rebecca Henderson has shown in her pioneering work on innovation, the changes that truly challenge incumbents are architectural—subtle structural shifts in how the pieces fit together. They’re hard for those steeped in the status quo to grasp—even when they want to—so they get dismissed until they’re obvious.
Bitcoin is one of those architectural innovations in how we think about money and financial infrastructure. That’s why many economists have a visceral reaction: it runs against much of what they’ve been taught and believe in. Concede the textbook: when done well, monetary policy can be extremely helpful. Confront the practice: few central banks are truly independent, fewer still consistent. Treat Bitcoin as a neutral asset and financial infrastructure, and the true pattern comes into focus.
A Digital Gold Rush
In a gold rush, it is important to not get caught in the frenzy—unless you’re selling shovels and you profit regardless of the outcome. But is Bitcoin just a frenzy? More than a decade on, the answer is no, for a simple reason: Satoshi Nakamoto solved a thorny computer‑science problem—the double‑spending problem. Before Bitcoin, any digital money needed someone to control the ledger—a central bank, financial institution, or wallet provider. With cryptography and incentives, Satoshi created a currency that’s scarce, hard to copy, and neutral: no one’s in charge of defining ownership or recording transfers.
Bitcoin’s neutrality is novel. Though often compared to gold, its properties are different enough to be category‑defining. Yes, both are scarce, both swing in price, and both hold value because society agrees they do. Gold has industrial and jewelry uses, but most of its value comes from its role as a store of value. And while gold has the advantage of centuries, as more of life moves online, a digitally native asset like Bitcoin has unique advantages—from spending to custody.
Finally, Bitcoin’s utility goes beyond the asset: its network can operate as an open, neutral settlement layer—especially as scaling tech raises throughput to meet real‑world payments demand. What is a neutral form of digital money—and an open protocol for moving value—worth to society?
Unpacking the Bitcoin Price
Media and crypto community obsess over price swings, but on a log scale much of the drama fades and a steadier trend appears. That pattern matches the diffusion of innovation along an S‑curve—popularized by Everett Rogers—where a new technology works through successive segments of adopters.
Bitcoin incubated within a small community of cypherpunks and developers. As its price rose, it drew a broader group of early adopters; then consumers and businesses—often in countries with unstable currencies—embraced it as an alternative savings tool and, at times, payment rails. Today, large financial institutions offer it, and sovereigns increasingly eye it to shape fintech and investment strategy.
This diffusion process, combined with Bitcoin’s fixed 21 million supply, inevitably translates the S-curve into a slow and steady price growth. So while regulatory and market uncertainty drive short-term swings, over longer periods of time addressable‑market expansion explains more of the data.
What’s Bitcoin’s equilibrium price? Unknown—and it hinges on where we are on the S‑curve. If Bitcoin stays niche, the price could stall. If it goes truly mainstream, further exponential growth is possible. Investors model this against gold, the value of payment and card networks, and more. It’s also prudent to consider the risk that some technological breakthrough or failure may render Bitcoin obsolete. Reassuringly, despite billions raised by would‑be alternatives, none has matched Bitcoin’s network effects or institutional acceptance.
Money‑As‑Software
As our tools for recording debits and credits have evolved, so has our idea of money: from shells and beads to salt, metals, paper notes, and ultimately database entries—alongside the rise of central bank independence. Through booms and crises we’ve oscillated between harder and more flexible money—a pendulum swinging between the needs of creditors and debtors.
Given that history, it isn’t unreasonable to think that a hard, neutral money secured by cryptographic keys could play a real role in global finance—and possibly be what comes next. Like every form of money before it, Bitcoin has value because enough people agree it does—and as consensus grows, its trajectory looks more like gold’s. That belief powers the “all‑in” Bitcoin treasury companies—Strategy, Trump Media & Technology Group, and Twenty One—backed by SoftBank, Tether, and the Commerce Secretary’s son’s firm, Cantor Fitzgerald. Their logic: if Bitcoin becomes the ultimate safe haven, accumulate as much as possible—even with risky leverage—so long as interest and principal can be serviced in dollars.
But there’s a flipside to expectation‑driven value: if, for any reason, society stops believing Bitcoin will reliably store value and buy future goods and services, its price could collapse toward zero. Fiat currencies experience something similar when faith in governments’ balance sheets fails, and while Bitcoin can’t be debased, other shocks could trigger a comparable loss of trust.
Ironically, reckless, leveraged buying by large Bitcoin‑treasury companies—meeting a sharp market correction—could be what undermines confidence in Bitcoin’s progress along its S‑curve. Even then, the underlying innovation is likely to endure: as neutral infrastructure, it disintermediates, cuts costs, and creates real economic value—not just regulatory or tax arbitrage—a puzzle worthy of economists’ attention, Rogoff’s included.
