Fluctuations in the market price of Bitcoin during the last decade have been extraordinary, bearing no comparison to, say, the price of gold, though there is some similarity with stock-market indexes, such as the S&P 500. Is this prima facie evidence that there is no “fair price” for bitcoin? Moreover, does it indicate that Bitcoin is not money but a fraud, as some have argued?

Properly to tackle it, this question requires going back to first principles of value and price. As a digital commodity (“digital gold”), Bitcoin is certainly peculiar, but its peculiarity lies more with use value than exchange value (or price). For, it has no obvious usefulness other than, potentially, the formal use value of “moneyness”.

The contrast with a regular commodity money is apparent. First, the formal “moneyness” of, say gold, is not created through the commitment of real resources to mine it. Rather, it is the indirect result of collective action by exchange participants transacting with each other – “moneyness” is a public property. At the same time, the “moneyness” of gold is inseparable from its natural use value (e.g., jewelry and microchips), which is indeed directly created through the private commitment of real resources. The inseparable link between the formal and the natural use value of a regular money commodity is the foundation of its “fair price” (more accurately, its value).

Bitcoin as a digital commodity lacks such a connection by construction since it has no use value other than its potential “moneyness”. At the same time, enormous real resources are committed on a private basis attempting directly to create the formal use value of “moneyness” for Bitcoin.

The vast fluctuations in price might indicate that it is impossible to do so on a private and direct basis. The lack of any other use value might be the ultimate reason for Bitcoin’s lack of success as money, rather than it being a fraud. More broadly, it might indicate that no form of digital money could attain the public property of “moneyness” without the involvement of the state, i.e., without an explicit public component.”

Costas Lapavitsas is Professor of Economics at the School of Oriental and African Studies, University of London. His research during the last few years has focused on the Eurozone and the financialisation of capitalism. He has published widely in the academic field, taught at several well-known universities, and writes for the international and the Greek press. In January 2015 he was elected in the Greek Parliament with the incoming SYRIZA party.

His most recent books include ‘The State of Capitalism: Economy, Society, and Hegemony’, Verso, 2023, ‘Capitalism in the Ottoman Balkans’, with P. Cakiroglu, I.B.Tauris, 2019, ‘The Left Case Against the EU’, Polity Press, 2018, ‘Against the Troika: Crisis and Austerity in the Eurozone’, with H. Flassbeck, Verso, 2015, and ‘Profiting Without Producing’, Verso, 2013.