Even though Bitcoin does not generate cash flows like companies, is not backed by physical reserves like gold, and is not guaranteed by any central authority… its market value reaches hundreds of billions! How does that happen?
Professor Andrew Urquhart (Birmingham Business School) provides an answer through recent academic literature 👇
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1️⃣ Scarcity and monetary policy
🔐 Bitcoin has a limited supply: only 21 million.
This makes it similar to gold and is viewed as a hedge against inflation amid excessive global money printing.
The Stock-to-Flow model explains the price historically quite well.
Studies like (Pagnotta & Buraschi 2018) and (Kruger et al. 2022) confirmed the importance of scarcity in supporting value.
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2️⃣ Network effect and actual use
📱 The more users there are, the more valuable the network becomes.
According to the 'Tokenomics' model, trust and reliance create increasing value.
Users' expectations that "others will accept Bitcoin" enhance stability.
The network gains strength from collective belief and daily reliance.
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3️⃣ Production cost and network security
💡 Mining (Proof-of-Work) consumes real energy and resources.
This creates a 'price floor' below which the price does not usually fall.
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.
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4️⃣ Speculation, sentiment, and media attention
📈 Price is heavily influenced by media coverage, search activity, and social media interest.
Studies (Urquhart 2018) and (Shen et al. 2019) demonstrated a strong correlation between public interest and price.
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5️⃣ The overall role in the economy
🏦 In an environment of low interest rates and fears of currency devaluation, Bitcoin has become a non-sovereign safe haven.
Studies (Baur et al. 2018) and (Jahanshahloo et al. 2025) showed that many investors hold Bitcoin for long periods.
However, it remains more of a speculative tool than an actual safe haven.
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✅ In summary:
The value of Bitcoin comes from a mix of programming and trust:
Cryptographic scarcity by code
Usage and adoption driven demand
Emotional and speculative momentum
Potential role in the global financial system
🔁 As Professor Urquhart concludes:
> "The value of Bitcoin does not come from what it does today… but from what its users believe it can become tomorrow."
