Ludwig von Mises & the Regression Theorem: Why Money Needs a Past
Ever wonder how something becomes money in the first place? Ludwig von Mises answered that nearly a century ago with what’s now known as the Regression Theorem.
The problem is this: For people to accept something as money today, they need to believe others will accept it tomorrow. But where does that initial value come from?
Mises explained it like this: The value of money today comes from the value it had yesterday. That value yesterday came from the day before—and so on. But this can’t go back forever. Eventually, we regress to the point where the good wasn’t used as money at all, but as a commodity with real, non-monetary value.
Gold, for example, had industrial and ornamental value before it was used as money. That prior use gave it a baseline value people could trust—so it could take on monetary properties over time.
Mises’ theorem answers the chicken-and-egg problem of money. Money doesn’t come from thin air. It evolves, rooted in real-world demand, long before it becomes a unit of exchange.
So how does this relate to Bitcoin?
Bitcoin skeptics often argue that it violates the regression theorem because it had no “commodity use” before becoming money. But early Bitcoin adopters did value it—first for its digital scarcity, then as an uncensorable payment network, and eventually as a hedge against fiat debasement. Its utility as a decentralized, permissionless system gave it the spark. Market adoption did the rest.
The regression theorem doesn’t disqualify Bitcoin—it explains how it crossed the bridge from novelty to value. Bitcoin created a new kind of digital commodity: pure scarcity, secured by math and energy.
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