The virtual currency Bitcoin has received considerable attention in the past few years and more recently due to its price surge and subsequent volatility. At the end of 2017–in only a year’s time–the price of a Bitcoin increased about twentyfold to almost $20K. The sudden and unsteady changes in Bitcoin’s price beg the question–how do we consider its price levels? Given that an argument can be made that Bitcoin is a currency, a security, and a commodity, different economic theories might explain the evolution of its price.
Joost van der Burgt is a policy advisor at the Dutch National Bank, the central bank of the Netherlands, and is on a secondment at the Federal Reserve Bank of San Francisco in the Financial Institutions Supervision and Credit Division.