Hayek's Vision: How a 1976 Nobel Winning Economist Predicted Bitcoin

1/5 Friedrich August von Hayek (1899–1992) was a leading figure in the Austrian School of Economics and one of the most influential economic thinkers of the 20th century. His work spanned economics, political philosophy, psychology, and law, but his core contribution centered on the limits of centralized knowledge and the virtues of spontaneous order. He is best known for his defense of classical liberalism and for warning that attempts to centrally plan an economy inevitably lead to inefficiency and authoritarianism.

Hayek studied under Ludwig von Mises and extended many of his mentor's ideas. Hayek's idea of competing private currencies is one of his most radical and forward-looking proposals, and it directly prefigures Bitcoin. 2/ In "The Denationalisation of Money" (1976) Hayek argued that the monopoly governments hold over currency issuance is both economically harmful and politically dangerous. Government money is inherently unstable because it can be debased at will. Central banks respond to political incentives, not necessarily long-term economic stability. If people could freely choose between multiple currencies, bad money would lose favor to good, stable money.

He proposed allowing private institutions to issue their own currencies, competing in the market like any other good or service.

Who was Ludwig von Mises—and why should Bitcoiners care?

Ludwig von Mises (1881–1973) was a fearless defender of free markets and a major force behind Austrian Economics—a school of thought that treats the economy as something built from real people making real decisions. Born in the old Austro-Hungarian Empire, Mises studied in Vienna and was shaped by Carl Menger’s idea that value comes from personal judgment, not some central authority.

Mises warned that socialism destroys the very tool needed for smart economic choices: real prices. Without prices created through buying and selling in free markets, there’s no way to tell if resources are being used well or just wasted. As a result, central planning loses touch with what people actually want or need. Mises saw two main types of socialism. The first is what we’d now call redistributionism. It lets capitalism do the hard work of creating wealth, then steps in afterward with taxes to 'spread the wealth around' based on arbitrary or subjective political or social beliefs. This system creaates a big problem: over time, it weakens the engine that makes wealth possible. High taxes kill motivation to work or invest. Why work hard if the government will take most of it? Why not do less and make more from handouts? Fewer people innovate, and more people demand their 'fair share' of the fruits of other's work. Eventually, people just fight over dividing the shrinking pie instead of baking a bigger one.

Who was Carl Menger, Father of Austrian Economics?

150 years before Bitcoin, Menger would craft the principles that help define its value.

Carl Menger was born in 1840 in Prussia and first studied law in Prague before moving to Vienna. In 1871, he started Austrian Economics by explaining that the worth of a good comes from personal choice. This idea was very different from Marxist socialism, which says value comes from the amount of labor needed to make something. It also broke with classical economics, which tied prices to the cost of producing goods (like labor and materials). Menger's work would factor heavily into understanding utility and adoption for things like Bitcoin.

Menger’s foremost contribution was his articulation of subjective value theory: he argued that value does not reside in goods themselves or in the labor embodied in them, but in the importance an individual attaches to them for achieving their own ends. By shifting the focus from “intrinsic” value to personal valuation, he laid the groundwork for understanding markets as aggregations of individual choices and preferences. Menger's approach solved the famous “diamond–water paradox”: Water is essential for life yet is usually sold for pennies, while diamonds, which are not necessary for life at all, sell for thousands of dollars per carat. Why? Marxism and classical theories that focused on production costs or the total usefulness of a good could not resolve this puzzle.

Menger also introduced the concept of 'marginal utility.'

To use a Bitcoin adoption analogy, it isn’t the whales or hodlers who determine Bitcoin’s value but the marginal buyer—the fence-riding, prospective Bitcoiner—who doesn't own bitcoin but is thinking about it. When that purchase is made, they become the marginal adopter and that valuation—for that next slice of Bitcoin—defines the true value of the asset. These principles that applies equally to stocks, gold or any other good.

Bitcoin : Pascal’s Wager

1/7 Who Was Pascal?
Blaise Pascal (1623–1662) was a French mathematician, physicist, philosopher, and writer. He made significant contributions to probability theory, projective geometry, and fluid mechanics. His experiments on pressure led to Pascal's law, foundational in hydraulics. He invented an early mechanical calculator, the Pascaline. In philosophy, his Pensées explored human nature and faith, introducing Pascal’s Wager. A devout Jansenist later in life, he emphasized reason’s limits and the necessity of faith. Pascal also influenced computer science, with the Pascal programming language named after him. Despite dying at 39, his impact spans mathematics, science, computing, and philosophy. 2/ What Is Pascal’s Wager?
Pascal’s Wager argues that when faced with uncertainty about God’s existence, the rational choice is to believe. If God exists and one believes, the reward is infinite (eternal happiness). If one disbelieves and is wrong, the loss is infinite (damnation). If God doesn’t exist, belief results in minor costs, while disbelief has no consequence. The asymmetry of potential outcomes makes belief the logical choice. The wager is not about proof but about rational decision-making under uncertainty.

1/15 What Is a #Bitcoin Worth Today? (thread)
A no-nonsense valuation.
TLDR: $55k+ https://t.co/TfmLOciRLntwitter.com/i/web/status/1…
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Earlier this month Cane Island published "Internet Adoption as an Indicator of Bitcoin’s Future Price." This note reveals the striking, consistent relationship between Bitcoin users and internet users over time.cane-island.digital