The renewed political and public interest in Bitcoin has brought Saifedean Ammous’s The Bitcoin Standard back into focus. While the book offers a compelling narrative on monetary history and digital currency, a critical examination reveals significant omissions and ideological biases that merit deeper analysis—especially as policymakers consider adopting Bitcoin into national financial frameworks.
Revisiting the Gold Standard Narrative
Ammous dedicates the first seven chapters of his book to extolling the virtues of the gold standard, framing it as the epitome of “sound money.” He portrays the 19th and early 20th centuries as eras of stability and prosperity under gold-backed currencies. However, this rosy depiction overlooks well-documented economic volatility during those periods, including frequent financial panics, bank runs, and deep recessions.
Historical evidence shows that the gold standard did not prevent economic crises—in fact, it often exacerbated them. The Great Depression, for instance, was prolonged by adherence to gold convertibility, which constrained fiscal and monetary responses. By attributing all economic progress to the gold standard and all decline to its abandonment, Ammous oversimplifies complex historical dynamics and ignores structural factors like industrialization, labor movements, and global trade shifts.
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The Flawed Conflation of Government and Central Banks
A central flaw in Ammous’s argument is his conflation of government-issued money with central banking systems. He treats both as monolithic entities engaged in arbitrary money creation, failing to distinguish between democratic fiscal policy and independent central bank operations.
As Richard Werner argues in Princes of the Yen, central banks often operate at cross-purposes with elected governments, particularly in countries like Japan where monetary policy has been used to enforce structural austerity against public interest. This distinction is crucial: while governments can be held accountable through elections, central banks are typically insulated from direct democratic oversight—raising valid concerns about legitimacy and transparency.
Yet Ammous does not advocate for democratizing central banks. Instead, he rejects state involvement in money creation altogether, promoting a decentralized, algorithm-driven alternative: Bitcoin.
Wealth Concentration and the Myth of "Earned" Returns
One of the most troubling aspects of The Bitcoin Standard is its uncritical celebration of wealth accumulation through passive investment. Ammous praises the ability of individuals to grow wealth simply by holding or lending Bitcoin, without distinguishing between income derived from productive labor and unearned returns from capital appreciation.
This perspective ignores how such systems inherently favor the already wealthy. Those with surplus capital can reinvest gains indefinitely, while wage earners struggle to keep pace with inflation. Over time, this dynamic erodes economic equality and undermines democratic institutions.
A functioning democracy requires mechanisms to counteract wealth concentration—such as progressive taxation, robust antitrust enforcement, and equitable access to financial infrastructure. Without these safeguards, even a “decentralized” currency like Bitcoin risks replicating the same inequalities it claims to oppose.
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Environmental and Ethical Blind Spots
Ammous assumes infinite resource availability, dismissing concerns about environmental degradation and social exploitation linked to extractive economic models. Yet Bitcoin mining consumes vast amounts of energy—more than some countries—largely powered by fossil fuels in regions with lax regulations.
Moreover, the pursuit of rare earth minerals for blockchain hardware has led to human rights abuses and ecological damage in developing nations. These externalities are absent from Ammous’s analysis, revealing a narrow focus on monetary mechanics at the expense of broader ethical considerations.
Bitcoin as Reserve Currency? Practical and Structural Challenges
In the final chapters, Ammous proposes adopting Bitcoin as a U.S. reserve currency—a suggestion now reflected in legislative efforts like the BITCOIN Act (S. 4912, 2024). The bill calls for the Treasury to acquire up to 200,000 Bitcoins over five years, creating a “Strategic Bitcoin Reserve.”
While politically symbolic, this move raises serious economic questions:
- Price manipulation: Government purchases would inevitably inflate Bitcoin’s market value, benefiting early adopters at taxpayer expense.
- Volatility: Bitcoin’s price swings make it unsuitable as a stable store of value—let alone a foundation for national monetary policy.
- Supply limits: With over 19.9 million of 21 million Bitcoins already mined (as of late 2024), the dwindling block rewards threaten miner incentives. Future reliance on transaction fees could render small transactions prohibitively expensive.
Furthermore, Section 4(f) of the proposed bill expands the definition of “Bitcoin” to include forked cryptocurrencies—an inclusion that risks exposing public funds to volatile and potentially fraudulent altcoins.
The Blockchain Trilemma: Security vs. Scalability
Matt Levine’s concept of the “blockchain trilemma” highlights a fundamental limitation: no blockchain can simultaneously achieve decentralization, security, and scalability. Bitcoin prioritizes decentralization and security—but sacrifices speed and efficiency.
Each transaction requires confirmation across a distributed network, taking 5–6 minutes on average. This makes Bitcoin impractical for everyday payments or high-frequency trading. As a result, its use as a currency has plateaued at around 10 million monthly transactions since 2017—despite global economic growth.
Instead, Bitcoin functions primarily as a speculative asset, akin to gold or non-dividend-paying stocks. It generates no intrinsic yield, produces no goods or services, and contributes little to real economic output.
Toward Democratic Monetary Reform
Rather than replacing government money with crypto assets, reformers should focus on democratizing existing systems. Scholars like Leah Downey, Robert Hockett, and Saule Omarova argue for structural changes that separate money creation from private banking interests.
Hockett’s Citizens’ Ledger model proposes placing money issuance under Treasury control, ensuring that new money finances public infrastructure rather than inflating asset bubbles. Omarova similarly advocates for a public digital ledger managed by a reformed Federal Reserve—accountable to citizens, not Wall Street.
These approaches align with broader monetary reform proposals like the American Monetary Reform Act, which establishes an independent advisory body to guide Congress on managing the money supply responsibly—balancing expert input with democratic oversight.
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Frequently Asked Questions (FAQ)
Q: Is Bitcoin truly decentralized?
A: While Bitcoin operates without a central authority, mining power is increasingly concentrated among large pools—raising concerns about control and governance.
Q: Can Bitcoin prevent inflation?
A: Its fixed supply (21 million) prevents artificial inflation via overprinting. However, it risks deflation during economic growth—a scenario central banks actively avoid due to its recessionary effects.
Q: Does Bitcoin support financial inclusion?
A: Currently, high volatility and technical barriers limit access. Most users are affluent speculators rather than underserved populations.
Q: Why hasn’t Bitcoin replaced cash?
A: Slow transaction speeds, high fees during peak usage, and lack of price stability make it impractical for daily commerce.
Q: Could government adoption stabilize Bitcoin?
A: Public investment might reduce volatility short-term but risks distorting markets and exposing taxpayers to speculative losses.
Q: What’s the alternative to crypto-based money?
A: Publicly controlled digital currencies—like a Fed-backed digital dollar—could offer efficiency without sacrificing accountability or stability.
Conclusion
The Bitcoin Standard offers valuable insights into monetary theory but falls short as a blueprint for sustainable economic reform. Its idealization of historical monetary regimes, dismissal of ecological limits, and failure to address wealth inequality reveal an ideology more aligned with libertarian absolutism than pragmatic governance.
True financial innovation must prioritize stability, inclusivity, and democratic accountability—not just technological novelty. As debates around Bitcoin intensify, policymakers must look beyond hype and assess what kind of financial future we want to build—one driven by speculation or one rooted in shared prosperity.
Core Keywords: Bitcoin Standard, sound money, monetary reform, wealth concentration, blockchain trilemma, decentralized currency, government money creation