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Social Sciences › Economics, Econometrics and Finance › Finance
The distributional consequences of Bitcoin
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Overview
Paper Summary
Conflicts of Interest
Identified Weaknesses
Rating Explanation
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Paper Summary
Paperzilla title
Bitcoin Boom: Making the Rich Richer and the Rest Poorer? (Spoiler: Probably)
The paper argues that a continuously rising Bitcoin price, detached from any real economic function, results in wealth redistribution from latecomers and non-holders to early adopters. This redistribution occurs even without considering trading behavior or a bubble burst, impacting consumption levels and potentially widening societal disparities.
Possible Conflicts of Interest
The authors work at the European Central Bank (ECB), which has taken official positions critical of Bitcoin. This potential conflict of interest may introduce bias into their analysis and interpretation of Bitcoin's economic effects.
Identified Weaknesses
Oversimplified Model
The paper's model simplifies the Bitcoin economy into two groups, Early Birds and Latecomers, without considering non-holders, potentially misrepresenting the impact on a broader population.
Unrealistic Bitcoin Valuation Assumption
The paper assumes a continuous rise in Bitcoin's value without sufficient justification, relying on speculative investment behavior rather than inherent utility or economic contribution.
Selective Focus, Omitting Key Downsides
The paper omits key considerations such as the energy consumption of Bitcoin mining, its use in illicit activities, and the potential for regulatory restrictions, presenting an incomplete view of Bitcoin's impact on society.
Limited Scenario Analysis
The paper's focus on a "Bitcoin-positive" scenario neglects the possibility of a bubble burst and its economic consequences, limiting the analysis to a limited subset of scenarios.
Unsupported Pension Fund Claims
The assumed direct relationship between Bitcoin adoption by pension funds and increased solvency lacks robust supporting evidence and ignores associated risks.
Rating Explanation
While the paper identifies potential redistributive effects of a continuously rising Bitcoin price, its oversimplified model, unrealistic assumptions, and selective focus limit its analytical rigor and overall contribution to the debate. The authors' potential conflict of interest further undermines the paper's objectivity. These weaknesses lead to a rating of 2.
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File Information
Original Title:
The distributional consequences of Bitcoin
File Name:
ssrn-4985877.pdf
[download]
File Size:
0.47 MB
Uploaded:
July 08, 2025 at 11:23 AM
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