Bitcoin is scarce. Its supply is limited, and dividing coins into smaller units does not create more of it. But scarcity alone does not automatically create value.
Scarcity Is Everywhere
Many things are scarce without being valuable. A random object may be unique, yet worthless if nobody wants it. Scarcity simply means that something is limited. Value appears only when there is demand for what is scarce.
Consider a famous example discussed by the Financial Times: an individual’s teeth are scarce. There is only one set in the world. Yet they have no market value, because nobody wants them. Their scarcity alone does not matter.
Scarcity, therefore, does not imply value. The next question, then, is why Bitcoin is valued at all.
Why Bitcoin Is Valuable
Bitcoin is valuable because people want to hold it.
Bitcoin offers properties that many people find attractive: it can be transferred globally, held without relying on banks, and its supply schedule is predetermined. People use it to store purchasing power outside traditional financial systems. This is where scarcity becomes important.
Demand for ordinary goods can be satisfied. But demand for purchasing power is different. Purchasing power represents future possibilities and choices, which is why people rarely feel they have enough of it.
Why Scarcity Matters In Money
If something people use to store purchasing power can be created without limit, increased demand simply leads to increased supply, weakening its value. Because demand for purchasing power rarely disappears, maintaining scarcity becomes crucial. Scarcity prevents dilution.
Bitcoin’s fixed supply does not create value on its own. But once people want to hold Bitcoin, its scarcity becomes essential because it protects the value over time.
Scarcity alone does not give something value. But when something is desired as money or a store of purchasing power, scarcity becomes a necessary property.
Scarcity does not create value. But without scarcity, value cannot last.