The Endogenous Constraint: Hysteresis, Stagflation, and the Structural Inhibition of Monetary Velocity in the Bitcoin Network (2016-2025)
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arXiv
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| Natura: | Preprint |
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2025
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| _version_ | 1866909950403411968 |
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| author | Soleimani, Hamoon |
| author_facet | Soleimani, Hamoon |
| contents | Bitcoin operates as a macroeconomic paradox: it combines a strictly predetermined, inelastic monetary issuance schedule with a stochastic, highly elastic demand for scarce block space. This paper empirically validates the Endogenous Constraint Hypothesis, positing that protocol-level throughput limits generate a non-linear negative feedback loop between network friction and base-layer monetary velocity. Using a verified Transaction Cost Index (TCI) derived from Blockchain.com on-chain data and Hansen's (2000) threshold regression, we identify a definitive structural break at the 90th percentile of friction (TCI ~ 1.63). The analysis reveals a bifurcation in network utility: while the network exhibits robust velocity growth of +15.44% during normal regimes, this collapses to +6.06% during shock regimes, yielding a statistically significant Net Utility Contraction of -9.39% (p = 0.012). Crucially, Instrumental Variable (IV) tests utilizing Hashrate Variation as a supply-side instrument fail to detect a significant relationship in a linear specification (p=0.196), confirming that the velocity constraint is strictly a regime-switching phenomenon rather than a continuous linear function. Furthermore, we document a "Crypto Multiplier" inversion: high friction correlates with a +8.03% increase in capital concentration per entity, suggesting that congestion forces a substitution from active velocity to speculative hoarding. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_07886 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | The Endogenous Constraint: Hysteresis, Stagflation, and the Structural Inhibition of Monetary Velocity in the Bitcoin Network (2016-2025) Soleimani, Hamoon Statistical Finance General Finance Pricing of Securities Bitcoin operates as a macroeconomic paradox: it combines a strictly predetermined, inelastic monetary issuance schedule with a stochastic, highly elastic demand for scarce block space. This paper empirically validates the Endogenous Constraint Hypothesis, positing that protocol-level throughput limits generate a non-linear negative feedback loop between network friction and base-layer monetary velocity. Using a verified Transaction Cost Index (TCI) derived from Blockchain.com on-chain data and Hansen's (2000) threshold regression, we identify a definitive structural break at the 90th percentile of friction (TCI ~ 1.63). The analysis reveals a bifurcation in network utility: while the network exhibits robust velocity growth of +15.44% during normal regimes, this collapses to +6.06% during shock regimes, yielding a statistically significant Net Utility Contraction of -9.39% (p = 0.012). Crucially, Instrumental Variable (IV) tests utilizing Hashrate Variation as a supply-side instrument fail to detect a significant relationship in a linear specification (p=0.196), confirming that the velocity constraint is strictly a regime-switching phenomenon rather than a continuous linear function. Furthermore, we document a "Crypto Multiplier" inversion: high friction correlates with a +8.03% increase in capital concentration per entity, suggesting that congestion forces a substitution from active velocity to speculative hoarding. |
| title | The Endogenous Constraint: Hysteresis, Stagflation, and the Structural Inhibition of Monetary Velocity in the Bitcoin Network (2016-2025) |
| topic | Statistical Finance General Finance Pricing of Securities |
| url | https://arxiv.org/abs/2512.07886 |