You might have read the headlines. “Sweden could be the first economy to introduce its own cryptocurrency” (Business Insider) or “Sweden’s Very Own Bitcoin” (Bloomberg). But why would a country issue a cryptocurrency, their “own Bitcoin”, when the major selling argument of such a currency is that it is decentralized and not controlled by an authority? The confusion is understandable, especially since the Riksbank (the Swedish central bank) made a number of references to cryptocurrency in their first report, a little more than a year ago. …

In conversations about Bitcoin I often get the question of why Bitcoin is really worth anything? Why would anyone pay 6000 dollars for a “digital coin” that you can’t even touch and that barely any store accept as payment? Let’s go through the basics.


First of all, the price of anything in a free market is always fundamentally about supply and demand. The demand side is especially interesting for Bitcoin since it is the first digital asset that is actually strictly limited. Mathematics combined with the consensus of people using the system guarantees that there will never be more than 21 million bitcoins. …

A site that lists the most popular cryptocurrencies sorted by market cap is now at around number 300 on the list of most visited web sites, world wide. The term market cap has traditionally been used for the total value of all outstanding shares of a company but was eagerly adopted by the crypto community. This also lead to the value of Bitcoin being compared to the value of companies.

Before Bitcoin nobody except nerdy economists talked about the total value of a currency and few of us would be able to make a good guess as to how many dollars or euros are in circulation. Still, using this number to compare Bitcoin to other currencies is of course fine, though you should be aware of the subtleties concerning money supply. Strictly speaking the roughly 17 million bitcoins in existence should be compared to the monetary base of other currencies, which corresponds to bills and coins held by the public as well as deposits held by banks in their accounts at the central bank, i.e. …

Last week a statement by Augustin Carstens, head of the Bank for International Settlements, caught the attention of cryptocurrency enthusiasts on Twitter. “BIS Chief to Crypto Coders: ‘Stop Trying to Create Money’” was the headline of the article published by Coindesk. It was met mostly by laughter and sarcastic remarks in the crypto community but the interview with Carstens actually contains both errors and a display of contempt that deserves some real criticism.

Below is the full question and answer from the interview that Coindesk quoted:

Don’t you think it’s a positive side effect that Bitcoin has got many young people thinking about money, money creation and the financial system?


David Hedqvist

Writes about economics, money, computer science, cryptocurrency and related topics. Running since 2012.

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