Why does Bitcoin have value?

What makes money good?

Without money, you would have to swap goods directly. A farmer with lamb would need to find a shoemaker who wants meat at exactly the moment the farmer needs shoes. Money solves this problem. Everyone accepts it, because everyone knows others will accept it too.

In medieval Iceland, homespun woollen cloth (vaðmál) was used as a means of payment. Elsewhere, shells, salt and gold have played the same role. Ammous argues that the best money is whatever is easiest to sell without losing value. The book calls this salability, and it has three parts:

• Across scale. The money works for both small and large purchases, from a cup of coffee to a flat.
• Across space. It is easy to move between places and countries.
• Across time. It holds its value from year to year, so saving it makes sense.

Salability across time is the hardest. It requires that nobody can create more of the money at will.

When money is easy to make

If more of the money is easy to make, more will be made. The more valuable it becomes, the more it pays to produce it. The new units dilute the value of the existing ones. Ammous calls this the easy money trap.

The island of Yap in the Pacific is a good example. Its people used large stone discs, known as rai stones, as money. The stones were quarried on Palau, hundreds of kilometres away, and carried across the sea in small boats, so few were added each year. In the late 19th century, a sea captain named David O'Keefe began shipping stones to the island in bulk on a large ship. The supply grew, and the stones gradually lost their role as money.

Gold has escaped this trap. Almost all the gold ever mined still exists, about 222,600 tonnes according to the World Gold Council, and mining adds less than 2% to that stock each year. The ratio between the existing stock and yearly production is called stock-to-flow. For gold it is around 60: it would take about 60 years of current mining to double all the gold in the world. The higher the ratio, the harder it is to dilute the value.

Money that can be printed

At the start of the 20th century, the world's main currencies were tied to gold. When the First World War broke out in 1914, many countries stopped exchanging banknotes for gold so they could print money to pay for the war. In 1971, the US government cut the dollar's last link to gold.

Since then, almost every currency in the world has been a fiat currencyFiat currencyGovernment-issued money whose value rests on law and trust rather than gold, like the Icelandic króna.. Fiat money rests on law and trust in the state, and central banks can increase its supply as they see fit. In the United States, for example, the money supply (M2) grew by more than 40% between February 2020 and April 2022. When more money chases the same goods, prices rise. That is InflationInflationA general rise in prices over time, which means each króna buys less than before..

Ammous argues that this has far-reaching effects. Money that loses value encourages people to spend now. Money that holds its value encourages saving and long-term thinking.

Iceland's experience with the króna

Few countries know inflation as well as Iceland:

• 1981: Two zeros were removed from the króna. One hundred old krónur became one new króna.
• 1983: Prices more than doubled in twelve months.
• 2008-2017: After the banking collapse, capital controls were in force and people couldn't freely move their savings abroad. Inflation reached 18.6% in January 2009.
• 2008-2026: According to Statistics Iceland, prices rose by 147% between January 2008 and September 2026. What cost ISK 10,000 now costs almost ISK 25,000.

The króna loses value even when everything goes to plan. The Central Bank of Iceland's inflation target is 2.5% a year. If it is met, the króna's purchasing power halves in about 28 years. That is why many people in Iceland look to an asset that nobody can print more of. The króna's history is covered in more detail in What is money?

Bitcoin: money nobody can print

Bitcoin was designed to avoid the easy money trap. Its rules are part of the software that runs on thousands of nodesNodeA computer that runs a crypto network's software, keeps a copy of the blockchain and checks that new transactions and blocks follow the rules. around the world. Thanks to this DecentralisationDecentralisationWhen power and responsibility are spread across many participants, instead of one bank, company or government controlling a system., no single party controls the network:

• A cap of 21 million. There will never be more than 21 million bitcoin. More than 20 million are already in circulation, over 95% of the total.
• Shrinking issuance. About every four years, the number of new bitcoin is cut in half in what is called the halving. Since the April 2024 halving, supply grows by about 0.8% a year, a lower rate than gold's.
• Supply doesn't respond to price. When the gold price rises, it pays to mine more. When the price of bitcoin rises, more people also join in MiningMiningThe process in which computers compete to solve a puzzle so they can add the next block to the blockchain and earn new bitcoin and fees., but the system automatically makes the puzzles harder about every two weeks. New bitcoin keep arriving at the same pace, however many compete for them.

The third point is the heart of the book's argument. In Ammous's view, bitcoin is the first asset in history whose supply doesn't grow when demand grows. Changes in demand therefore show up directly in the price, both up and down. On top of that, several million bitcoin are thought to be lost for good, for example through lost private keysPrivate keyA secret number that proves you own the crypto in your wallet. Whoever holds the private key controls the crypto..

Nobody can change the rules alone. If someone tried to create extra bitcoin, the nodes on the network would reject it, and changing the rule would need almost the whole network to agree to dilute its own holdings. Anyone can run a node and verify the total supply without trusting anyone.

Easy to send, divide and store

Bitcoin also does well on the other two parts of salability, and has more strengths besides:

• Across space. You can send bitcoin anywhere in the world, at any time of day. A transaction is usually included in a BlockBlockA batch of transactions added to a blockchain in one go, together with a reference to the block before it. within about ten minutes. Moving gold between countries is expensive, slow and risky.
• Across scale. One bitcoin divides into 100 million satoshisSatoshi (sats)The smallest unit of bitcoin: one satoshi is one hundred-millionth of a bitcoin, or 0.00000001 BTC.. You don't need to buy a whole bitcoin; you can buy a small fraction, and large sums move just as easily in a single transaction.
• No middleman. Bitcoin needs no bank or payment network. If you keep bitcoin in Self-custodySelf-custodyHolding the private keys to your crypto in your own wallet, so nobody else controls it but all the responsibility for the keys is yours., nobody can freeze it or stop a transfer. Access comes down to 12 or 24 words, a seed phraseSeed phraseA list of 12 or 24 words that backs up every key in your wallet, so whoever has the words can restore the wallet and take the crypto..
• Security. The Bitcoin network has run almost without interruption since January 2009. Proof of workProof of workA consensus method where the right to add the next block to a blockchain goes to whoever first solves a hard computing puzzle. makes trying to forge transactions enormously expensive.

That is why many people call bitcoin digital gold. It is a store of valueStore of valueAn asset that keeps its purchasing power over a long time, so it can be saved now and used later, as gold has done for centuries. like gold, but far easier to send and divide.

Network effects and adoption

Money becomes more useful the more people use it. The first telephone was useless, because nobody else had one. This is called the network effect.

Bitcoin is the oldest CryptocurrencyCryptocurrencyA digital currency secured by cryptography and recorded on a shared ledger, with no bank or government issuing or controlling it. and by far the largest by market capitalisationMarket capitalisationThe total value of all units of a coin in circulation, calculated as the price of one unit times the number of units.. In recent years it has moved into mainstream finance:

• Exchange-traded funds. On 10 January 2024, the US Securities and Exchange Commission (SEC) approved exchange-traded fundsExchange-traded fund (ETF)A fund traded on a stock exchange like an ordinary share, which can for example track the price of bitcoin. that hold bitcoin. Large asset managers such as BlackRock and Fidelity now run such funds.
• Governments. In March 2025, the US government decided not to sell bitcoin it had seized, but to keep it in a dedicated reserve.
• Regulation. In Iceland, Act No. 101/2025 on markets in crypto-assets, based on MiCAMiCAThe EU regulation on markets in crypto-assets, in force in Iceland since 1 January 2026, which sets the same rules for crypto services across the EEA., has applied since 1 January 2026. People and companies can buy bitcoin from supervised providers.

Every new user makes the network more useful to everyone else. Other cryptocurrencies can copy the code, but not the Bitcoin network's long history, security and reach.

What do the critics say?

Not everyone is convinced. These are the main objections, and how Bitcoin's supporters respond:

• The price swings a lot. Between November 2021 and November 2022, the price of bitcoin fell by more than 75%. Ammous acknowledges that bitcoin's salability across time isn't fully proven yet. Supporters expect VolatilityVolatilityHow much and how quickly the price of an asset moves up and down. to fall as the market grows, but that isn't guaranteed.
• No cash flow. Bitcoin pays no dividends or interest, and in 2024 two experts at the European Central Bank wrote that its fair value was therefore zero. The reply is that gold and the króna produce no cash flow either. Money isn't a company; it is a way to store and move value.
• Competition. Anyone can create a new cryptocurrency. Yet bitcoin has always been the largest, and new coins have neither its history nor its network effects.
• Energy use. MiningMiningThe process in which computers compete to solve a puzzle so they can add the next block to the blockchain and earn new bitcoin and fees. uses a lot of electricity. Supporters reply that the energy is exactly what makes the network secure, and that a large share of mining runs on renewable energy, as it does in Iceland.
• Governments. States can restrict bitcoin trading. The network has kept running despite bans, for example in China in 2021.

Which arguments weigh most is for you to judge.

Closing thoughts

Bitcoin has value because it is scarce in a way no money has been before. Its supply is fixed, its rules are open to everyone, and no single party controls the network. At a time when central banks expand the money supply and the króna loses value year after year, that explains why more and more people see bitcoin as digital gold.

The price still swings a lot, though, and the past says nothing about the future. Learn about the risks before you buy.