Bitcoin: 21 million cap and the mystery of its underlying asset

Bitcoin: 21 million units and the question of its underlying asset

An asset that pays no dividends, interest, or central bank backing would have nearly tripled the money of those who bought small amounts weekly over four years, according to a widely circulated calculation. The core question, never fully answered, is not how much bitcoin is worth: it is what supports that value. The underlying asset.

It is defined in three lines: digital money protected by cryptography, circulating in a decentralized computer network, proposed in 2008 under the pseudonym of Satoshi Nakamoto and launched in 2009 as open-source software. With such a resume — issued by no one, guaranteed by mathematics — controversy was served from the first block.

What is bitcoin and where does its closed supply come from?

Three elements explain the invention. The network operates peer-to-peer: there is no bank or government validating, but thousands of nodes checking and recording each transaction. The blockchain is the ledger recording all transactions, chained block by block, with no possibility of rewriting the past. And mining is the auction distributing the work: nodes compete solving mathematical problems and earn new bitcoins plus transaction fees.

Scarcity is the other leg. The protocol caps maximum issuance at 21 million units, each divisible to eight decimal places. They cannot be duplicated, counterfeited, or interfered with. That is the point according to defenders: no other object combines these qualities — unique, divisible, interchangeable, and storable without notice.

What is the underlying asset of bitcoin?

The most repeated answer among supporters is counterintuitive: the backing is precisely that there is no issuer. If a monetary system works only with internet, energy, and mathematics, no external agent can manipulate monetary policy or censor payments. The only threat would be governments being honest and spending wisely.

This thesis is objected to on a fundamental error. A currency is not a fraction of a country's wealth, nor does it make its holder a shareholder of the State, nor does it oblige anyone to deliver a proportional share of national wealth upon changing it: it is a unit of account capable of extinguishing debts. And the dollar has not been backed by gold for half a century, despite what is repeated.

Another, more cynical, reading places the backing outside the asset: bitcoin's underlying asset would be the money-printing machine and poor fiscal policy. The more issued and collected, the better. The Venezuelan example — the bundle of bills needed to buy a lemon — is cited as illustrating what happens when issuance goes out of control.

And a lateral, most uncomfortable question: what is the underlying asset of gold? None. Underlying assets belong to objects worth nothing themselves, exchanged for something else, like casino chips, worth only what the cashier is willing to give for them. In the chain of comparisons, some appeal to the case of Linux: an operating system without a company behind it that ended up dominating mobiles, cloud, artificial intelligence, and supercomputers.

From Dutch tulips to digital gold

The comparison with the Dutch tulip bubble is the classic reproach: it is worth what people say it is worth, and nothing more. The nuances opposing this reading are three. It is digital, so it moves instantly and outside the tax authority, customs, police, and international sanctions. A bubble grows, bursts, and ends; bitcoin has been falling and rising since 2011, when it went from $32 to a cent.

And it has precious metal traits, with nuances: limited quantity — in gold, only approximately — impossibility of counterfeiting with current means, and a mass of people paying because they believe others will pay later. Hence the label of enhanced gold used by its most enthusiastic defenders: protecting wealth from inflation and confiscation.

Faith, cycles, and target prices

If there is no asset behind, there is only faith, and faith is measured. The skeptical thesis compares it to a religion: value rises when new believers enter and falls when those present sell and no one appears on the other side. Conclusion of this view: in two years, it may be worth one million euros or one euro.

In contrast, those operating with the chart in front utter concrete figures. Some assert that it will neither rise above $300,000 nor fall below $40,000 in the next two years, and that the reasonable selling zone is between $120,000 and $180,000. The same narrative includes specific purchases and sales: selling around $50,000 in 2021, repurchasing at $33,000, $30,000, $21,000, and $19,000 with an average of $25,000, and selling committed assets in 2022 at $68,000. All seasoned with the idea that mass psychology rules here, a cycle of greed and antiestéticar repeating with the same patterns.

The calculation most unsettling to skeptics is that of periodic contributions. Buying 10 euros of bitcoin weekly between March 12, 2020, and March 6, 2024, would have converted €2,080 into €5,900, a 183.49% return, according to the simulator cited for the calculation. The psychological backstory is also debated: those who bought at peaks of $260, $1,000, and $20,000 were labeled naive for years, and time has shifted that label elsewhere.

Energy, internet, and the risk of someone pulling the cable

Technical concerns are no minor. The first is the energy expenditure required to sustain the network. The second, dependence on uncontrolled infrastructure: tomorrow, the consortia governing the internet could decide to erase anything resembling this, and the network would be reduced to messages between yogurt containers and a piece of nylon. That something justified by its incorruptibility depends on a network deployed by others is, at minimum, disturbing.

Some also say it bluntly from the income statement: they do not deposit their wealth in something disappearing if the power goes out or connection is cut. On the other side, the immediate reply: with that safety rule, no digital investment would survive a general blackout, and real estate value is also not for parties if the system collapses entirely.

El Salvador and the tax as alibi

The most cited experiment is in El Salvador, the country declaring bitcoin legal tender. Its president summarized it in a phrase circulating as a meme and argument: if the Government can print unlimited money from nothing, why does it collect taxes? Underlying is the suspicion that many taxes exist to sustain the fiction that they fund the State.

The kinder version of this argument does not ask for the State's disappearance, but something else: truly honest governments would be those renouncing issuance and limiting themselves to collecting in a currency no one can manipulate. Perhaps we will not see this, they admit, but those coming after. El Salvador would be the beginning, not the end.

With the tulip thesis and digital gold on the table, and a return calculation settling discussions in two lines, the initial question remains unanswered. What if the underlying asset were not an object, but the certainty that no one can print more?