Bitcoin has plenty of opinions on where it’s going, whether it be to the moon or to zero. There’s an article () that caught my eye on Cointelegraph that talked about why Bitcoin couldn’t go to zero. In this video, we discuss the idea of Bitcoin’s intrinsic value and some of the circular logic in terms of where it gets its value from.
Part of what makes this question interesting (at least to me) is that traditionally when we talk about Bitcoin, we focus exclusively on market psychology and sentiment. However, this question is more fundamental in nature: Does Bitcoin have any intrinsic value? Theoretically if Bitcoin had no intrinsic value, it should trend to $0 over a long period of time. For the record, when I say $0, I mean “effective zero” as opposed to literal zero.
There have been numerous attempts to find the intrinsic value of Bitcoin. Probably the most popular attempt was by Chris Burniske (and Ark Invest) by applying the equation of exchange. The issue I have with this method is I don’t really view Bitcoin as a currency since it doesn’t fit any of the traditional characteristics of a currency, so that makes it difficult to apply the equation of exchange.
There are also many that argue the floor value of Bitcoin is based on the cost to produce a Bitcoin, similar to how we might do commodity analysis. Yet Bitcoin isn’t used industrially the same way most commodities are and unlike gold (which also is rarely used industrially), it doesn’t have the same length of history and psychology. If Bitcoin becomes unprofitable to mine, people will simply stop mining it and difficulty will reduce – it’s not like physical commodities where you literally cannot reduce the cost of producing said commodity (without coming up with another way to extract the resource at least).
However, Bitcoin isn’t like a company that can go bankrupt either. This brings us to arguably one of the oddest aspects about Bitcoin: Its value comes from its ability to transfer value. That perception of value comes from the masses – So how stable can that be over the course of, say, half a century? It’s tough to say and is part of what makes Bitcoin so difficult to evaluate.
Another common argument for why Bitcoin can go to zero is that other altcoins will supplant it. Part of the issue with this argument is the fact that most of these altcoins haven’t had to deal with the issue of real scale. Often any flaws in governance and security are exacerbated as a cryptocurrency (or really anything) scales, so I find it difficult to believe Bitcoin will be usurped easily for a long-time.
In my opinion, there is a slim chance Bitcoin could go to zero in the long-term (it’s not happening over the next 5 years – too much has been invested for it to fade quickly at this point). The highest chance of this happening is if the cryptocurrency space as whole trends towards zero, which goes into even bigger questions such as the value of public vs. private blockchains which is a bit beyond the scope of this video (although I briefly discuss my thoughts on that towards the end of this video).
This is a deeper type of video (as you can tell) and I’d love to hear your thoughts on what you think about this in the long, long-term. Thank you for watching!
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