Can Bitcoin Become Money? The Monetary Rule Problem
21 Pages Posted: 23 Feb 2018 Last revised: 29 Feb 2020
Date Written: July 25, 2019
The growing literature on Bitcoin can be divided in two groups. One performs an economic analysis of Bitcoin focusing on its monetary characteristics. The other one looks takes a financial look at the price of Bitcoin. Interestingly, both of these groups have not given much more than passing comments to the problem whether or not Bitcoin has the right monetary rule. This paper argues that Bitcoin in particular, and cryptocurrencies in general, do not have a good monetary rule, and that this shortcoming seriously limits its prospect of becoming a well-established currency.
Keywords: bitcoin, monetary rules, nominal income targeting
JEL Classification: E42, E51
Suggested Citation: Suggested Citation