Witnessing the Storm
My initial encounter with Bitcoin happened quite early. In those days, the market was immature, full of what seemed like risk-free opportunities. My mentor, Mr. Guo Qing, recognized these chances clearly and would profit from them effortlessly through casual trades. Although I never fully grasped it at the time, I kept a watchful eye, reflecting on its implications from an economic perspective. As a student deeply interested in monetary systems, this new form of digital asset naturally captured my attention.
On June 18, 2019, everything changed. Facebook announced the formation of the Libra Association and released the Libra white paper. It was a flash of lightning that, for a brief moment, illuminated the future of money. That vision was so powerful it kept me awake at night, and it motivated me to dive deeper into the world of cryptocurrency.
At that time, Bitcoin was already trading at a high price—close to $20,000 at its peak, with a total market capitalization comparable to that of a large publicly traded company. Many argued that Bitcoin was a purely speculative instrument with no intrinsic value and that it would eventually collapse.
However, having studied financial markets for many years, I’ve learned that speculation is a natural and necessary component of any active market. Dismissing an entire market as “just speculative” avoids the real question: what is driving that speculation? The search for that answer is far more meaningful.
The Rise of Technical Trust
On a purely physical level, Bitcoin is nothing more than a string of encrypted code. It holds no intrinsic value. Yet its market value prompts a deeper inquiry into the nature of money.
Consider the U.S. dollar. Does it have intrinsic value? Not really—it’s just well-printed paper. Its value stems from the full faith and credit of the U.S. government. This is true for all fiat currencies: they are backed by governmental trust and authority.
Similarly, Bitcoin derives its value from a new form of credibility: technical trust. Through blockchain technology, Bitcoin operates on a decentralized, transparent, and tamper-resistant public ledger. This system is open for anyone to inspect and is extremely difficult to manipulate. As a result, it has earned the trust of millions worldwide.
People are drawn to assets that are secure and free from centralized control. If sovereign governments can back currencies worth quadrillions of dollars, it should be no surprise that technical trust can support an asset class worth hundreds of billions.
In the end, all value rests on trust. The real comparison between traditional money and cryptocurrencies lies in the strength and resilience of that trust.
The Flaws of Sovereign Currency
In the modern era, strong governments issue strong currencies. The U.S. dollar is a clear example. Yet this system is far from perfect.
After the 2008 financial crisis and again during the COVID-19 pandemic, central banks in the U.S., Europe, and Japan engaged in aggressive money printing. This led to growing concerns about currency devaluation and increased demand for alternative stores of value.
Currency over-issuance has several negative effects. One is inflation—the silent erosion of purchasing power that affects savers and wage earners. Another is the unfair redistribution of wealth. New money typically enters the economy through financial institutions and large corporations, leaving small businesses and ordinary individuals at a disadvantage. This dynamic exacerbates inequality.
Bitcoin emerged in this context. Designed with a fixed supply, it offered a digital alternative immune to inflationary monetary policy. Its birth, shortly after the collapse of Lehman Brothers, was even accompanied by a coded message referencing bank bailouts—an unmistakable critique of the traditional financial system.
A decade later, Libra’s announcement made this critique even more explicit. Its vision was to create a “global currency” and a “financial infrastructure that serves billions.” But its potential impact was so disruptive that it faced immediate regulatory pushback and was ultimately shelved.
The Future of Money
Both Bitcoin and Libra challenged the dominance of sovereign money—and central banks took notice. Since 2019, many have accelerated their research into central bank digital currencies (CBDCs).
So, is Bitcoin money? Will it replace sovereign currencies? In the foreseeable future, no. Most cryptocurrencies function more like digital assets than currencies. They serve as investment vehicles rather than mediums of exchange.
That said, sovereign currencies may integrate useful features from crypto technologies. Imagine a currency backed by both sovereign authority and technical trust—a powerful combination.
This leads to broader questions about the international monetary system. The U.S. dollar has been the world’s reserve currency for over 70 years. While it has facilitated global trade, it has also allowed the U.S. to exercise what has been called an “exorbitant privilege.”
Will new digital technologies reinforce the dollar’s dominance? Or can emerging economies leverage these tools to strengthen their own currencies? For example, could digitalization accelerate the internationalization of the Chinese renminbi? These are open questions with no easy answers.
Evolving Beliefs
The future of money is uncertain. The only constant is change. To make sense of this evolution, we must revisit fundamental questions about the nature of money.
I recall the 1990s, when Japan was widely criticized for its loose monetary policy. Yet after the 2008 crisis, the U.S. and Europe embraced even more aggressive easing measures. By 2020, money printing by major central banks had become a competitive sport.
The rules of monetary policy have clearly changed. China remains an outlier in its disciplined approach, while other major economies continue to experiment. We are in the middle of a historical turning point.
Human understanding of money is evolving rapidly against a backdrop of geopolitical shifts—U.S.-China tensions, the pandemic, and regional conflicts all play a role. Monetary competition will undoubtedly shape the economic landscape of the future.
Bitcoin is not money. Its future is uncertain. But it has accelerated the evolution of monetary systems and revealed what future currencies might look like. Almost certainly, the money of tomorrow will incorporate some elements pioneered by Bitcoin.
Although it is not itself a currency, Bitcoin is a boundary stone—a marker of where we’ve been and a signpost pointing toward what’s next.
Frequently Asked Questions
What gives Bitcoin its value?
Bitcoin’s value comes from what is often called “technical trust.” Its blockchain-based system is decentralized, transparent, and highly secure, which attracts users seeking an alternative to government-backed currencies. Unlike fiat money, Bitcoin has a fixed supply, which protects it from inflationary monetary policies.
Can Bitcoin replace traditional currencies?
It is unlikely that Bitcoin will replace sovereign currencies in the foreseeable future. It functions more as a digital asset or store of value rather than a daily medium of exchange. Most governments are unwilling to cede monetary authority to a decentralized system.
How does cryptocurrency affect financial equality?
While some argue that crypto can democratize finance, others point out that early adopters and large holders may benefit disproportionately. Sovereign money expansion often benefits banks and corporations first, whereas crypto offers global access but also comes with high volatility and regulatory uncertainty.
What is the difference between Bitcoin and central bank digital currencies (CBDCs)?
Bitcoin is decentralized and operates without a central authority. CBDCs are digital versions of sovereign currencies, issued and regulated by central banks. CBDCs aim to combine the efficiency of digital transactions with the stability of government-backed money.
Why did Facebook’s Libra project fail?
Libra faced strong regulatory resistance because of its potential to disrupt national monetary systems. Governments were concerned about losing control over monetary policy and financial surveillance. Its scale and backing by a corporate giant added to these concerns.
How can digital currencies improve financial systems?
Digital currencies can make transactions faster, cheaper, and more transparent. They can also improve financial inclusion by providing services to unbanked populations. 👉 Explore strategies for a modern financial system that incorporates digital assets securely.