The distributional consequences of Bitcoin<sup>1</sup>

Ulrich Bindseil; Jürgen Schaaf; Ulrich Bindseil; Jürgen Schaaf

doi:10.3934/NAR.2025016

National Accounting Review

2025, Volume 7, Issue 3: 367-397. doi: 10.3934/NAR.2025016

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Research article

The distributional consequences of Bitcoin¹

Ulrich Bindseil ,
Jürgen Schaaf ^,

European Central Bank, Frankfurt am Main, Hessen, Germany

Received: 24 March 2025 Revised: 14 July 2025 Accepted: 29 July 2025 Published: 11 August 2025
JEL Codes: E21, E25, E53, G12

The original promise of Nakamoto in 2008 to provide the world with a better global means of payment has not materialised. Instead, the focus has increasingly shifted to Bitcoin as an investment asset promising high capital gains. Promoters of this investment vision have made little effort relating Bitcoin to an economic function which would justify its valuation. While most economists argue that the Bitcoin boom is a speculative bubble that will eventually burst, in this paper, we analyse the impact of a Bitcoin-positive scenario in which its price continues to rise in the foreseeable future. What sounds intuitively promising or at least not harmful is problematic: Since Bitcoin does not increase the productive potential of the economy, the consequences of the assumed continued increase in value are essentially redistributive, i.e., the wealth effects on consumption of early Bitcoin holders can only come at the expense of consumption by the rest of society, which is impoverished. While previous discussions on the redistributive effects of Bitcoin assumed that badly timed trading was a necessary condition for losses, this paper shows that neither poor timing of trades nor holding Bitcoin at all are necessary for being negatively affected by a Bitcoin-positive scenario.
- Bitcoin,
- asset price bubble,
- wealth effect on consumption,
- redistribution
Citation: Ulrich Bindseil, Jürgen Schaaf. The distributional consequences of Bitcoin1[J]. National Accounting Review, 2025, 7(3): 367-397. doi: 10.3934/NAR.2025016

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Abstract

The original promise of Nakamoto in 2008 to provide the world with a better global means of payment has not materialised. Instead, the focus has increasingly shifted to Bitcoin as an investment asset promising high capital gains. Promoters of this investment vision have made little effort relating Bitcoin to an economic function which would justify its valuation. While most economists argue that the Bitcoin boom is a speculative bubble that will eventually burst, in this paper, we analyse the impact of a Bitcoin-positive scenario in which its price continues to rise in the foreseeable future. What sounds intuitively promising or at least not harmful is problematic: Since Bitcoin does not increase the productive potential of the economy, the consequences of the assumed continued increase in value are essentially redistributive, i.e., the wealth effects on consumption of early Bitcoin holders can only come at the expense of consumption by the rest of society, which is impoverished. While previous discussions on the redistributive effects of Bitcoin assumed that badly timed trading was a necessary condition for losses, this paper shows that neither poor timing of trades nor holding Bitcoin at all are necessary for being negatively affected by a Bitcoin-positive scenario.

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