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Like Bitcoin, Austrian School economists question state intervention.
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The increase in demand for a scarce commodity like bitcoin is what leads to the rise.
«It’s ironic that bitcoin only reached $100,000 by bribing politicians and sleeping with the government. Without the planned government intervention, this milestone would never have been achieved.” This was the reaction of economist Peter Schiff, a well-known bitcoin (BTC) skeptic, to the digital currency’s arrival at USD 100,000.
It is about an idea which is repeated by many opponents of the digital currency, for whom the market freedom that bitcoin trading implies did not influence the rise in the pricesince they consider that everything is due “to the cohesive power of the State.”
It’s ironic that #Bitcoin only hit $100k by buying off politicians and getting in bed with government. Without expected government intervention, this milestone would never have been hit. What couldn’t be done in a free market was achieved through the cohesive power of the state.
— Peter Schiff (@PeterSchiff) December 5, 2024
This belief has even been professed by the United States Treasury Office, which in a report for the fourth quarter of the year drew attention to what they call “institutional sponsorship of bitcoin.”
They allege that the global reach achieved by the ecosystem and its revaluation is due to FOMO (fear of missing out). generated by large investors and companies. They cite, in that sense, what they call “the institutional sponsorship of bitcoin.”
As examples, the multimillionaires are mentioned money inflows from ETFs (highlighting the company BlackRock) and the investments in BTC that MicroStrategy makes. Consequently, they think that the interest of these and other large companies has been decisive for the global recognition of the digital currency.
The Austrian School explains why bitcoin is rising
However, economic currents such as the Austrian Schoolwhich originated in Vienna at the end of the 19th century, show how these positions are far from reality. Above all, if we take into account the relationship that the postulates of this current have with the Bitcoin fundamentals.
The Austrian School highlights the role of the price mechanism in the coordination of economic activity. Prices, according to Austrian economists, communicate crucial information about shortages and consumer preferences.
This is a situation that becomes very clear in the Bitcoin network, whose currency has a limited issuance and is clearly pre-established in its code. Consequently, as a scarce good, it is logical that BTC acquire more value.
That explains why it reached USD 100,000 and why will it continue to rise, regardless of its volatility. The laws of the market themselves indicate it: scarce goods generate greater interest. And if there is greater demand and less supply, the value of the goods rises.
In this way, as CriptoNoticias has explained, the central ideas of the Austrian School they focus in the way capital, money and currencies respond to the laws of supply and demand like any other good.
As part of these foundations, It is thought that the price reflects a market reality. This means that the value of a good or service, such as BTC, is derived from the utility that individuals attribute to it and not from the support offered by governments or companies, as critics have commented.
This is what one of the founders of this economic movement, Carl Menger, said, for whom “money is not an invention of the State. It is not the product of a legislative act. The sanction of political authority is not even necessary for its existence.
An argument that goes against what most think, mainly because money is produced by governments today. It has been this way in most places in the world for at least the last 100 years, creating the illusion that the State is the reason money exists.
Menger’s position was supported by another representative of this current, Ludwig von Mises, who expanded the theory on the origin of money. He was looking for an answer to the question of its value in terms of goods and services.
Mises explained that it is impossible for anything to simply be labeled “money” and that, therefore, get value. “There must be something more to the process,” Mises thought, “for value must arise from a living market experience.”
How does this lesson apply to Bitcoin? The underlying value of the network is related to its payment system, which combines a distributed network, an updated and verified ledger for each transaction. It also includes cryptography and a peer-to-peer exchange system. that operates in a decentralized manner and independent of the State.
It is these reasons that make the value of the currency created by Satoshi Nakamoto is not something that a government, company or a social contract can achieve.
In line with Mises’ ideas, BTC also offers a real market experience with a valuable good and a needed service. This is one of the advantages of Bitcoin. In fact, if there were no payment network linked to the digital currency, the digital currency it would have no value.
Mises made two additional contributions to the theory of money. He said central banking was not necessary and predicted it would be detrimental to the soundness of money. In his ideology, money must function completely outside the State, just as happens with bitcoin.
It’s not just the price, but also the freedom
Mises closely linked the soundness of money with one’s own freedom. A topic that another promoter of the Austrian movement delved into, Friedrich A. Hayekwho warned about the dangers of central banking.
With this in mind he supported a private money system based on various technologies, including commodity basket indices. All of these currencies would compete for market dominance, like any other commodity. His goal was reach the denationalization of money and promote financial freedom.
They are ideas that seemed crazy in the 20th century, but that came to life in the 21st century with BTC. The technology that gave life to digital currency did not exist in Hayek’s time, but it is real now with Bitcoin. A monetary system based on a limited supply, which operates without the intervention of States and which does not respond to any government, such as Austrian economists aspire.
In simple terms, the currency’s most striking qualities is its potential as an easy-to-trade, expensive to create, impossible to counterfeit, and limited-issue digital asset. In its 15 years of existence Its advantages over fiat currency have been demonstrated and even on precious metalssince it is infinitely divisible and is easy to transport.
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