Does Bitcoin Have Any Essential or Intrinsic Value how well suited is it to investors? Don’t nurture any fears for it it’s going to fade away in just five minutes of reading this piece. The Bitcoin FUD busters are here to remove any doubts, dispelling the myths and doubts you might have or heard. This time we’ll be looking at the idea of whether or not Bitcoin has essential value or is it a bubble with no inherent value.
What does Bitcoin cryptocurrency do? It’s a common question, and certainly a sensible one to ask before making any investment in not just Bitcoin or Ethereum or any other cryptocurrency. But ask different people and you might get many different answers. Some will tell you Bitcoin is a store of value to be saved like Gold but a digital one.
Some, that it’s an online digital currency to be spent. The answer is that they are both right in their respective interests. Bitcoin is so unique because it is both digital gold but can also be used as money.
This is a tricky concept to grasp, and that’s sort of understandable as no other asset has these qualities. Many have unfortunately seen this ambiguity as evidence that it’s neither and subsequently valueless.
The short answer is, they are wrong. When it comes to valuing any asset or currency, we can look at two aspects:
- Perceived Value
- Essential or Inherent Value
Perceived value is assigned when a collective belief that something has value. It should be clear to all that Bitcoin’s perceived value is now very high even though not all time high like a few months back but still very high. The market capitalization crossed a major milestone on 19 February, surpassing 1 trillion, bigger than Facebook, Visa and JPMorgan, to name but a few. There’s also a huge number of people using it. In 2021, there were over 100 million Bitcoin wallets with positive balances, while the number of active daily Bitcoin wallets reached an average of 1 million last year which is increasing every now and then. These now include many major corporations, including Tesla, Motley Fool, MicroStrategy, and more.
Bitcoin’s intrinsic or essential value is more difficult to define. If we are talking about Bitcoin as a store of value, we can talk about the technology that underpins it—the Bitcoin blockchain. Blockchain technology gives Bitcoin its value because it’s immutable, it’s never been hacked, and it has a fixed supply. That fixed supply doesn’t necessarily give it value in itself, but it increases the value that it does have. This pretty much defines it and how it’s valuable in its own way.
If we think of Bitcoin as a medium of exchange, the answer becomes less clear.
However, this is a problem that’s true of all currencies, even the legal tender ones. Yes, it’s true for all. The entire concept of money really comes down to perceived value. What makes the Pound Sterlings or Dollars or Euros in your bank account worth anything? The US dollar moved away from the Gold Standard in 1971, the monetary system where a country’s currency had a value directly linked to gold.
Today, no government-issued currency in existence is backed by any tangible asset. It all comes down to faith and use. As we have seen, Bitcoin is being used, it’s trusted, and it has the technology to warrant that trust which is being used in hundreds of other fields now. The moral here is that just because we can’t define its value in familiar terms doesn’t mean it has none. Bitcoin’s ubiquity within today’s world is a clear indication that technology isn’t going away anytime soon and that value will only grow moving forward. After a few years, you are going to see adaption of this technology in every walk of life.