You’ll hear two objections in the same breath. Bitcoin is far too volatile to be money, and bitcoin itself makes prices fall.
Both are fair, and they’re linked. The volatility one usually comes first, and the answer to both starts with flipping the unit you measure in. The second one gets the effect right and the cause wrong, which is why it needs the more careful answer.
Volatility is what the transition looks like, not what the destination looks like. And no, bitcoin doesn’t make prices fall. Technology makes prices fall. Bitcoin is the first money nobody can expand to stop that from happening, so measured in bitcoin the falls finally show. Over years, most things get cheaper in bitcoin terms, and houses have the most left to fall. That fall has two layers you have to keep separate. One is a one-time repricing as the world adopts a fixed unit, and the other is a permanent, gentler fall at the rate we get better at making things.
Too volatile to be money?
The swings have a reason. Bitcoin’s supply follows a fixed schedule nobody can change. Pounds can be created, so when more are wanted, more appear. The price of a pound stays “one pound” while its value changes underneath. When demand for bitcoin rises or falls, nobody can adjust the supply, so price is the only thing that can move. Every shift in the world’s opinion has to show up in the price. On top of that, many holders are new, many bought with borrowed money, and each cycle flushes out people who still think in pounds and sell back into them. Billions of people changing what they use as money is a phase change in human behaviour, and phase changes are turbulent. The big falls also track the old system’s own tides. Credit gets scarce and everything sells off for cash, bitcoin included. The money floods back in. Nothing about bitcoin changes when that happens, so its price is where the extra pounds show up.
The two currencies fail in different ways. Fiat [government money issued by decree and managed by policy] is volatile too, but reliably in one direction. The £80 weekly shop becomes £88 and it doesn’t come back. Malawi’s currency was cut roughly 44% in a single day, and the supermarkets closed to relabel the goods. Nobody at home calls that volatility, because the number printed on the note stays the same. The pound is stable in name and falling in fact. Bitcoin is violent in both directions around a long-run rise in what it buys. So the question is which kind of instability you want to hold your working life in for the next twenty years.
The objection also shrinks the closer you look. Volatility depends on how big the market is and how easily you can trade in it, and it falls as adoption grows. A small asset repricing the whole world can’t be smooth. As the market deepens and more people hold bitcoin as savings rather than as a trade, the swings won’t vanish soon, but they damp. You can already see bitcoin shifting from trading like a tech stock toward being held as protection against the old system’s risks.
And nobody says bitcoin has to do every job of money today. Money does three jobs. It’s something you spend, something you save in, and the unit you measure with. Today you bridge: keep next month’s bills in pounds, save long term in the scarce asset, spend over Lightning [a payment network built on bitcoin that settles instantly for fractions of a penny] where it makes sense. The claim was never that bitcoin is finished money this afternoon. The claim is about where the two systems are heading.
For measurement, what makes a good measuring stick over years is that nobody can bend it. The pound is steady from Tuesday to Wednesday and bends year after year by policy. Bitcoin swings from Tuesday to Wednesday and can’t be bent by anyone. For a unit of account [the unit prices and debts are quoted and compared in], that’s the property you need, because a ruler that changes length quietly corrupts every measurement built on top of it.
Does bitcoin itself make prices fall?
No, and the distinction matters. Bitcoin is neutral. The deflation belongs to the free market.
When someone finds a way to make the same thing with fewer inputs, competitors copy it, and prices get pushed down toward the cost of making one more unit. That force never stopped. You don’t see it in pounds because the system is built on debt that’s fixed in pound amounts, and broadly falling prices would make that debt unpayable. Wages fall but the mortgage doesn’t. Defaults cascade, banks fail. So governments and central banks create money and credit to keep prices rising, and the expanding money absorbs the gains that should have reached you as lower prices. The scale of the effort tells you how strong the underlying force is. In the two decades to around 2020 the world added roughly 185 trillion dollars of debt to buy about 46 trillion dollars of measured growth, and measured is doing work in that sentence, as you’ll see. Bitcoin doesn’t add a downward force to any of this. It removes the upward one. Nobody can create more of it, so productivity has nowhere to hide.
There’s a second reason prices fall in bitcoin during the transition, and it needs stating carefully, because it’s where the two effects get confused. The world is repricing itself into a money with only 21 million units, so bitcoin rises against most things while technology is also making them cheaper, and the two falls compound. Goods getting cheaper and the ruler strengthening are two different kinds of event, and neither one is bitcoin acting on prices. A house that cost around 300 bitcoin fell to about 40 in a few years even though its price in pounds went up, and it has kept falling since. Builders didn’t get seven and a half times more productive. The house’s price in pounds went up over those same years. All of the fall was the ruler strengthening as adoption grew, and then some. The monetisation effect [the world adopting a thing as money, which raises its value] is one-time, even though the one time is spread over decades and arrives in violent steps. The productivity effect keeps going.
The world measured in bitcoin, over years
Once the transition is mostly behind us, prices drift down at roughly the rate we improve. Call it 1% to 5% a year as a baseline, faster as AI and robotics spread. No committee sets that rate. Some years it’s quicker, some slower, and a war or a bad harvest still makes oil or wheat dearer for a while. Hard money [money that cannot be easily debased] doesn’t abolish scarcity. It stops the ruler lying about it.
Different things fall at different speeds. Anything digital races toward free, because copying costs nothing. Physical goods follow as more of their cost becomes software, automation, and cheap energy. Housing is the odd one out, because today’s house price carries a monetary premium [the extra price an asset commands because people use it to store savings when money won’t hold value]. That premium belongs to the one-time repricing, not the permanent drift. As money starts to hold its value, the premium bleeds out and a house drifts back toward what it’s worth as a place to live. After that, housing gets cheaper at the pace building gets cheaper, which is slower than software. You save for one instead of borrowing for most of your working life.
Your wage in bitcoin terms edges down, and you’re better off, because prices fall faster than pay adjusts. That’s the exact mirror of today, where your pay rises and buys less. Savings grow in what they buy just by sitting there. Ordinary people stop being forced to become investors simply to stand still. Borrowing gets dear and rare, because repaying in money that buys more year after year is heavy, so the economy runs more on savings and ownership stakes and less on borrowed money. And GDP looks flat or even shrinking while life visibly improves, because GDP counts spending, and abundance keeps turning valuable things free.
What people say back
“If prices fall, nobody spends.” People buy phones, laptops, and TVs today expecting next year’s model to be better or cheaper. Needing it now beats waiting for a cheaper one. What falling prices trim is the waste, the spending we only do because holding cash is punished.
“Deflation causes depressions.” In this system it would, and I don’t dodge that. If prices and wages fall while debts stay fixed, defaults cascade. But that’s an indictment of the debt design, not of cheaper goods. Most people have the 1930s in mind, when falling prices hit a system already loaded with debt. Productivity deflation in a low-debt system is progress arriving as lower prices.
“You’re cherry-picking the house dates.” On any single example, fair. The claim is about multi-year windows across cycles, and there the direction holds for most goods. Over months it can run the other way, because in a cash crunch bitcoin falls with everything in fiat terms and goods briefly get dearer in bitcoin. Years, not quarters.
The one condition
Everything above rests on a single caveat, and it’s better said plainly now than discovered later. It holds only if bitcoin stays decentralised and secure. That’s the only long-term variable that matters. If most coins end up pooled inside a few firms holding coins for other people and wrapped in paper claims [contracts that promise coins rather than the coins themselves], the signal can be muted and the old system rebuilt with new branding. That’s why self-custody [holding your own keys rather than leaving your coins with a firm] and real usage matter more than the price does. Coins that only ever sit still leave the spending on the old rails, and the old rails are where the control is.
Flip the question the chart asks you. “What’s bitcoin worth in pounds” measures the pound. “What does the house cost in bitcoin” measures the free market. Ask the second one across years and you can watch the free market finally doing what it always wanted to do, which is hand the gains back to you as lower prices.