Bitcoin's Relational Properties are Improving

Monetary properties fall into two categories: fixed and variable. Fixed properties are unchangeable and stem from the fundamental nature of the money itself. For example, gold’s properties, such as its scarcity and durability, are dictated by natural laws. Variable properties, however, depend on how the money is used in the real world and include traits like acceptance, liquidity, and volatility. These characteristics evolve based on adoption and usage patterns. A money that gains broader acceptance typically becomes more useful, liquid, and stable, while one that loses adoption sees its utility decline.

Bitcoin exemplifies how variable monetary properties can improve with increased adoption. Over the past decade, bitcoin's liquidity, volatility, acceptance, and censorship resistance have all strengthened as its network has grown. For instance, daily bitcoin trade volumes have increased from around $1 million in 2014 to over $10 billion in 2024, reflecting greater market activity and deeper exchange markets. Similarly, annual average 30-day volatility has dropped significantly, from 150% in 2014 to about 50% in 2024, making bitcoin a more stable asset and therefore more useful and competitive as money.

These trends highlight the reinforcing nature of bitcoin’s network effects. As more users, merchants, and institutions adopt bitcoin, its utility and reliability as a form of money continue to grow, enhancing its variable properties and solidifying its role in the global financial system.