Don’t fall for the hype — Why Bitcoin’s $10,000 Price Doesn’t Reflect Its True Value
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What's the value of Bitcoin? I can't tell you that, but I can tell you something equally important: Not a single person can tell you what the price of Bitcoin will be tomorrow, in a month, or in ten years. Not the Core development team that's sort-of directing the course for the booming cryptocurrency, not those ubiquitous ads that claim you could be earning millions on crypto, not even Satoshi Nakamoto, Bitcoin's secretive creator or group of creators whose identity is still a complete mystery.
The true value of Bitcoin has become a source of debate recently after its price has risen sharply in the past year despite issues like a recent split into two separate systems and moves by China to ban cryptocurrency trading.
That has led to concern about Bitcoin's future, and posed the question—is Bitcoin really worth anything? China orders all Bitcoin exchanges to close. Bitcoin is a category-defying beast. It's not why is bitcoin worth anything like gold, not exactly like currency, and not exactly like company stock, and yet it exhibits behavior similar to all of these asset categories.
It escapes the confines of economic theory: Try to define it in strictly economic terms, and you'll fail. For example, there's a theory that money is the same thing as debt, put forward in by British economist Alfred Mitchell-Innes. Within this theory, monetary transactions are essentially the exchange of a commodity for credit. And when a bank creates money, it's essentially creating debt. If you look at Bitcoin in this way, you could argue that it's worthless, because it really is created out of thin air.
With no authority backing it, new bitcoins are introduced free of debt, and in this why is bitcoin worth anything if there's no worthy debtor backing a currency, then the currency has no value. Take any definition of money and Bitcoin will fail some of its criteria, which one could use as proof that it's worth nothing for more on this topic, read this paper by Ole Bjerg.
But one can argue that Bitcoin's definition lies outside of the scope of any theory that concerns itself with the creation of money. It's a payment system, somewhat akin to PayPal, and PayPal is a multi-billion dollar why is bitcoin worth anything.
Its underlying blockchain technology can be used for a multitude of purposes—see Ethereumfor example, and hundreds of businesses based on its platform. And the fact that millions are using it daily make it a little bit like a social network, which is worthless if it only has two users but very valuable if everyone's using it.
A recent WSJ article illustrates this beautifully. The title posits that the value of Bitcoin is "probably zero," based on an odd, snake-eating-its-tail argument: Even if that's true, who says that this why is bitcoin worth anything the only valid use for Bitcoin? It's a decentralized system that changes over time, and it might end up being something else entirely. So which is it? The author does not provide a clear answer.
Anyone that ever tried to pin down the value of Bitcoin faced this problem. Company stock is fairly simple in comparison. Companies have revenues, earnings, and profit. You can calculate the return on investment, which tells you how much money your stock is earning you.
Even gold, a commodity whose price has been a hot topic for centuries, has some properties that can help you calculate its value: It's used for industrial purposes and for making jewelry.
It's also in finite supply, and it's very hard to make more of it. With Bitcoin, you've got very few metrics to start from. Its supply is limited to an ultimate 21 million bitcoins, but why is bitcoin worth anything could argue that inflation can happen through alternative cryptocurrencies, such as the recently created Bitcoin Cash. You could look into Bitcoin adoption by users and businesses—probably why is bitcoin worth anything only solid ground on which to base Bitcoin's value—but figures like "number of transactions per day" don't easily translate into dollars.
You could say, as some why is bitcoin worth anythingthat Bitcoin is only good to criminals, and look at the size of the black market as guidance. But Bitcoin is not fully anonymous; criminals would likely prefer cryptocurrencies like Monero and Zcash. And however you slice it, you'll always have the problem that the value of Bitcoin as a system might be more or less decoupled from the value of one bitcoin, the coin.
You can also go all technical on Bitcoin: Fire up a dashboard at any why is bitcoin worth anything, turn on some indicators such as MACD or Bollinger bands, and try to decipher the message hidden among the candlesticks.
Many analysts do this, but no matter what anyone tells you, technical analysis can never predict real-life events such as China banning all Bitcoin exchanges.
But dig a bit deeper, and you'll see no analyst has anything close to a perfect track record when it comes to Bitcoin. Those who keep saying that Bitcoin will continue growing have so far mostly been right.
Even after the recent drop in why is bitcoin worth anything, Bitcoin is roughly percent why is bitcoin worth anything valuable than it was at the beginning of the year. Many believe that there's some sort of bubble going on, but when will it burst? Chris Beauchamp, chief market analyst at IG, believes the current price has little to do with it. Instead, we will need to see a new rival emerge, or see a general disillusionment with why is bitcoin worth anything take hold ," he recently wrote.
Right now, Bitcoin's value lies in its potential. It has the potential to replace a government-issued currency of a community, country, or—if you're really optimistic—the whole world. It has the potential to disrupt the banking industry. It has the potential to become a store of value similar to gold, that's infinitely easier to obtain and trade than gold.
Sometime in the future, one of these potential uses, or an entirely new one, will become Bitcoin's killer feature. Either that, or something better will come why is bitcoin worth anything, and Bitcoin will be forgotten. The possibilities are many, and as long as we're not certain that they're all false, Bitcoin will be worth something. We're using cookies to improve your experience. Click Here to find out more. Business Like Follow Follow.
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