Since it’s “immaculate conception”, the debate of whether there is any intrinsic value to Bitcoin has raged throughout the financial world. Financial institutions such as the European Central Bank (ECB) and Reserve Bank of New York have claimed that there is zero intrinsic value. Goated value investors such as Charlie Munger and Warren Buffet have described Bitcoin has a digital Ponzi scheme. Why would anyone even bother to argue in counter to these modern day Titians of finance? Well, if the financial crisis of 2008 taught us anything it was that sometimes even the “experts” can get things wrong. So lets discuss whether or not Bitcoin has intrinsic value.
Munger woke up and chose violence 😂pic.twitter.com/kEzATzJ8EA
— Petar Momchev (@momchev12) February 16, 2023
In this discussion of Bitcoin’s intrinsic value it is critical that we define what intrinsic value means.
Intrinsic value refers to the inherent or subjective value that an individual ascribes to an asset, such as a stock or a bond. It is a measure of what an asset is worth, regardless of its market price or the current market conditions. In other words, intrinsic value takes into account the fundamental aspects of an asset, such as its earnings, growth prospects, and financial health, to determine its true value.
The concept of intrinsic value is often used in value investing, which is a strategy that involves buying assets that are undervalued relative to their intrinsic value. The idea is that over time, the market will recognize the true worth of these assets, and their prices will rise to reflect their intrinsic value.
It’s worth noting that intrinsic value can be subjective and can vary from person to person, depending on their individual investment objectives, risk tolerance, and assessment of an asset’s future prospects. From this it is obvious that the intrinsic value of all things differs from person to person, organization to group and is subjective.
“I have to be honest, it is hard to see that Bitcoin has what we tend to call intrinsic value," said Bank of England Governor Andrew Baileyhttps://t.co/Fx80u3qBWG
— Barry Silbert (@BarrySilbert) October 12, 2020
When we hear major financial institutions proclaim that Bitcoin has zero intrinsic value we need to dissect exactly what that means. Does this mean that the Bank of England means the price of Bitcoin will go to zero? Not necessarily Bitcoin could have value to others and no value to the bank because of the definition of intrinsic value discussed early.
THE VALUE THAT BITCOIN PROVIDES IS THE ABILITY TO STORE AND TRANSFER WEALTH OUTSIDE OF THE EXISTING FINANCIAL SYSTEM.
From the prospective of banks this makes Bitcoin and existential threat to the system in which it orchestrates. As an existential threat to the legacy financial system Bitcoin has no intrinsic value relative to the bank.
But does Bitcoin have intrinsic value to other parties and stake holders?
People operating with in the current financial system are subject to gain or lose value at the discretion of Central Banks, Governments and other financial institutions. Meaning the value that an individual accumulates with their time and energy can and is devalued and controlled by the traditional financial system.
For those that want choose to operate outside of this system Bitcoin is an option. The ability to operate outside of this system is intrinsically valuable to individuals. The worth of this value is highly speculative and up to great debate, but
While inflation has recently been an issue in western nations with traditionally strong nationally currencies, many countries such as Argentina, Lebanon, Nigeria and Venezuela have currencies that inflate nearly 100% annually. Meaning that the purchasing power of their currency is completely depleted every year making it impossible to save value in that currency. This leads to societal destabilization and chaos throughout these countries.
When the money breaks, people revolt.
— Gigi ⚡🧡 (@dergigi) February 16, 2023
Lebanon 🇱🇧pic.twitter.com/1GBsFDMh7y
JUST IN: Nigerians revolt at the Central Bank after it declared old currency notes no longer legal tender.
— Bitcoin Magazine (@BitcoinMagazine) February 15, 2023
🇳🇬 needs #Bitcoin pic.twitter.com/zhW5I0hGC1
While there are many critics of Bitcoin in regards to its Proof of Work consensus mechanism, network scalability and regulatory oversight this is not stopping people from adopting this technology. To those with no other alternative than Bitcoin to store and transfer value there is an intrinsic value. This value is subjective and even though in the US at the time this post is written Bitcoin is trading around $23,000 on Nigerian exchanges Bitcoin is valued closer to $35,000 due to the supply and demand of the digital asset in that region.
While Bitcoin is highly polarizing and much about the technology is up for debate. To say that Bitcoin has no intrinsic value to anyone is categorically false. As inflation rages across the global more people will look else where to store and transact value. Whether it is precious metals, digital assets or commodities is still yet to be determined but currently people are choosing Bitcoin in an attempt to secure their financial freedom.
Leave A Comment