The Market for Cryptocurrencies

27 Pages Posted: 15 Dec 2014

See all articles by Lawrence H. White

Lawrence H. White

George Mason University - Department of Economics; George Mason University - Mercatus Center

Date Written: December 14, 2014


Although it is sometimes considered one of a kind, or a first-mover monopolist in the market for cryptocurrencies, Bitcoin is surrounded by effective competitors. Between March 2013 and December 2014, while the market capitalization of Bitcoin grew four-fold, the market cap of other cryptocurrencies (“altcoins”) in the aggregate grew twelve-fold, eroding Bitcoin’s market share to 84% from 95%. Where Bitcoin is a non-profit project, the growth of altcoins has been driven by for-profit enterprises. Altcoins have introduced improvements in speed, robustness, and privacy. Contrary to the predictions of economists who tried to imagine what private irredeemable currencies would look like, cryptocurrencies have attained positive valuations by implementing a nominal quantity commitment with an observable public ledger, rather than by the traditional method of redeemability or a purchasing-power commitment. Cryptocurrencies are not all bubbles, although a number of bubble-like crashes (to below 98% of peak value) can be observed in the record. There is no reason to suppose that the market is plagued either by insufficient competition or by too much competition.

Keywords: cryptocurrency, Bitcoin, altcoins, denationalization of money, private currency, payment methods, remittances, exchange rates

JEL Classification: E42, E51, N10

Suggested Citation

White, Lawrence H., The Market for Cryptocurrencies (December 14, 2014). GMU Working Paper in Economics No. 14-45, Available at SSRN: or

Lawrence H. White (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States


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