In November 2017, Bitcoin (BTC) made a dramatic entrance into the big ring through its swift rise in the market. It was valued at $1,000 in March 2017. Then it briefly flirted with a value of $20,000 in mid-December of the same year. Later it experienced a precipitous descent over the year of 2018, with its lowest value touching $3,500 in November 2018. This episode brought it great scorn. Certain figures such as Warren Buffet and Jaime Damon saw it as their prediction coming true: BTC is a “scam” and will not survive. How can a currency that is based on “nothing” be seriously considered to succeed?

Two years after this drop, the BTC was back again and more lively than ever. It even experienced a major rebound period starting in May 2020, rising to $10,000 despite significant volatility. For example, it lost almost 14% between September 2 and 6, after a significant plunge in mid-March 2020 – just below the $ 5,000 threshold – in the market crash following the surge in COVID-19 cases and the multiplication of the number of countries confined.. So, what is the value of Bitcoin?

 Bitcoin, a misunderstood architecture

Satoshi Nakamoto—no doubt an invented name that represents a group of developers—created BTC as a decentralised peer-to-peer currency whose production is determined by an algorithm with a finite limit established at 21 million that should be reached by 2040.

The claim for this project is creating an alternative monetary system where the monetary production cannot be altered by human decisions o that it can combat the financial ills that caused the 2007 crisis, namely an uncontrolled profusion of credit by commercial banks with the consent of central banks.

The value of BTC is derived from its services: highly secured payments through the use of two safety keys and performed without an intermediary, leading to lower costs and faster transaction validation times (about 10 minutes).

Given the decentralised nature of its architecture, Bitcoin transactions are done outside usual monetary circuits and do away with banks and central banks and also the government. Bitcoin thus has a value without being linked to a raw material or government securities.

BTC is an attractive alternative for any individual residing in a country where there is widespread monetary instability and/or there is a regime controlling capital. Despite its volatility, BTC remains as a means for protecting one’s assets. Furthermore, since its surge in 2017, BTC has appeared as an attractive, risky investment vehicle in this context of weak or even negative interest rates. Considering its limited offer, it is by nature deflationary. Consequently, it is better to own Bitcoin than use it in transactions contrary to its original purpose.

Despite the modest size of its market—around 200 billion in capitalisation (based on the price as of 05/10/2020) compared to 1,700 billion dollars in circulation—BTC seems to have been institutionalised, and there is still a future market in Bitcoin. The amount of BTC addresses having more than 1 BTC rose to 800,000. This figure was at 20,000 in 2010. The amount of businesses accepting Bitcoin increased to around 15,000 businesses since March 2019 despite it not taking off as a means of payment. In France, Global P.O.S., the payment solutions software creator, announce in September 2019 with much fanfare its new payment terminal that accepts Bitcoin.

The end of Bitcoin’s does not seem to be coming any time soon… even if the announcement of Facebook’s cryptocurrency project LIBRA may darken its future.

 The LIBRA project, the firepower of Facebook

In June 2019, Mark Zuckerberg announced his cryptocurrency project called LIBRA. It was created to be a global stable currency, meaning a fixed-valued currency linked to a reserve of existing currencies (dollar, euro, pound, yen, Singapore dollar). The project stands out as the antithesis of Bitcoin. Faced with hostility from governments, the latest version of LIBRA published in April 2020 revolves around two proposals:

1- A stable currency 100% indexed to the local currency when the local currency is also available in digital version

2- A global stable currency as in its initial version indexed to a reserve of currencies when there is no local digital currency available.

Mark Zuckerberg is well aware that to win the battle over adopting it as the preferred currency, the cryptocurrency needs to be as easy to use for consumers as the local currency they use in their daily lives, or even easier so that it gains a following. Facebook users will need to be convinced to accept and use LIBRA. To do this, Facebook must provide a large number of partners on its networks and show a price incentive so users prefer LIBRA to the local currency.

To ensure the stability of the value of the LIBRA, it is necessary to maintain reserves in the local currency – or in the currencies constituting the reserve depending on the version of the LIBRA available. These reserves are managed by an institution – the LIBRA Reserve- and are held in the form of bank accounts in different establishments and sovereign securities. LIBRA is a cryptocurrency insofar as it based on blockchain, its blockchain, contrary to Bitcoin, is provided with permission. That means that only authorised participants—members of the LIBRA Association—can validate the transactions. This architecture is different from Bitcoin’s open-source design where all the network’s members ensure it works correctly.

The publication of the project in June 2019 drew vehement opposition from states fearing the strike force of Facebook’s network which, coupled with the stability of value, could win public support.The first to be attracted to LIBRA will no doubt be Facebook users located in countries with highly unstable currencies. Both American and European authorities are putting the brakes on LIBRA’s launch for the moment. But it is still planned by the end of 2020.

This healthy competition of disruptive projects has the benefit of pushing the countries themselves to reflect on the launch in the near future of a digital central bank currency that could speed up the end of cash. The Chinese central bank is now the most advanced in this project. Truly a historic turning point!

Nathalie Janson, associate professor of Economics, NEOMA Business School

16 November 2020
Janson Nathalie


Janson Nathalie

Nathalie Janson earned a PhD in Economics at the Université Paris I-La Sorbonne in collaboration with the ESSEC PhD programme. Since 2001, she is an Associate Professor of Economics at NEOMA Busines School where she teaches mostly Microeconomics, Money and Banking and Banking Organisation and Regulation. She has lectured in many countries including France, the USA, Colombia, China and Italy. Her main research interests are banking regulation (especially Basel regulation) and monetary policy design. Some of her research work has been published in peer-reviewed journals. She is present in the media and writes regularly for the press on issues related to the Euro area (the Greek crisis, the question of the Brexit and the current tension with the new elected Italian government), central bank monetary policy decisions and regulation of the banking industry. She develops a recent interest in cryptocurrencies.