Taghizadegan: The Regression Theorem Explains Bitcoin

by PFS on September 2, 2026

Interesting Working Paper from PFS member Rahim Taghizadegan writing at scholarium.

***

Working Paper

The Regression Theorem Explains Bitcoin

Rahim Taghizadegan

Working paper. The text is based on the lecture «Bitcoin from the Viewpoint of the Austrian School», given at the 19th Annual Meeting of the Property and Freedom Society, Bodrum, September 2025, and substantially extends it.

Abstract. Austrian economists have invoked Mises’s regression theorem for over a decade to prove Bitcoin impossible. Both camps of the ensuing quarrel misread it. The theorem explains how the valuation of a medium of exchange is learned; it forbids nothing. Read properly, it even explains the strangest feature of Bitcoin’s history, the cyclical monetisation along ever higher lows. I add three refinements: Laum’s sacred money at the end of the historical regression, rising marginal production costs as the essence of commodity money, and moneyness as a matter of degree.

1. A peculiar list

For a decade and a half, economists of my school declared Bitcoin impossible on the authority of Mises’s regression theorem. The possibilities that it becomes money were pronounced null; its monetisation was a myth, a Ponzi scheme, an inflationist fraud (Shostak 2013; North 2013; LeRoux 2014). Several of these authors I know personally; I watched most of the verdicts take shape. By now there even exists a list of them (Kinsella 2025). This paper is not one more entry in that quarrel. I would rather tell how my knowledge of Austrian economics helped me explain, for many years, why Bitcoin would probably fail, and what I as an Austrian economist may have learned when it did not fail.

I begin with a confession. I speak at about a dozen Bitcoin conferences every year about Austrian economics; the lecture behind this paper was the first I ever gave about Bitcoin at a conference of Austrian economists, and I was a little ashamed of the delay. The tables have turned, and the turn itself tells you something. A while ago one would have assumed that Bitcoin is a niche interest within Austrian economics, since we Austrians were of course open to private forms of money. By now Austrian economics survives rather as a niche interest within Bitcoin: most of the contemporary interest in the school, most of the young people eager to learn about it, comes from Bitcoiners. Something profound must have happened, and a school whose loudest representatives proved the phenomenon impossible owes its new students an account of what its central theorem actually says.

I discovered Bitcoin at the end of 2009, in a forum called anti-state.com, where someone was shilling the idea. Two things became apparent at once: it looked like a ledger-based form of money, and it looked like something libertarians would adopt, and both made me sceptical. A ledger is the mark of token money, which more or less necessitates the very trust that money should absolve us from. Money allows collaboration among people who do not already trust one another; that is the reason our school speaks of catallaxy. I had used e-gold, and I learned where the trust in a ledger ultimately resides when my balance ended up in the hands of an American agency. The libertarian token seemed confined to a niche besides: maybe five percent of libertarians take an interest in digital money, libertarians are perhaps five percent of the people who care about liberty, and those are five percent of the population, if one is optimistic. Nice to have, certainly nothing of economic significance. Still, in mid-2011, after the first bubble had burst, I told my readers that it could not hurt to acquire a few bitcoins, for the improbable case that they survive; an investment this was not, rather pure gambling (Taghizadegan 2011b). For years the scepticism remained reasonable, and I kept it. What may an economist learn when a thing his theory seemed to forbid refuses, cycle after cycle, to die?