Bitcoin. The new baseline for "value"

[tinopener]

Commentators often state that Bitcoin has no intrinsic value, yet are happy to compare its market capitalization to Apple Inc. and gold

1) Apple Inc. is only the worlds most valuable company because consumers are happy to spend twice the amount for an iPhone than a cheaper competitor for no tangible reason. The battery issue alone is enough to prove the law of diminishing returns with a product like mobile phones.

2) Gold. The industrial value of gold is 8% of the price, making it even less valuable than an industrial like Apple.

Could Bitcoin just be a necessary lowering of the bar to understand what value actually means in our consumer age?

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[Fileiro]

Interesting perspective.

I think bitcoin's value lies both in its ability to move wealth effortlessly across borders as well as being the digital equivalent of the US Dollar, in that the other crypto-currencies are traded against btc, just like commodities are traded in dollars.

[remle26]

Exactly. Bitcoin value lies on how it will be accepted globally. Interms of crypto currency and real curreny. It has a potential to standardize how market works across the globe

[odolvlobo]

"Intrinsic value" is an ambiguous term. Does anything really have "intrinsic" value?

Shares of Apple have value because the company generates income. Gold and Bitcoin don't generate income so their value is based solely on their utility (more specifically, the discounted value of their future utility).

The utility of gold consists of its uses in manufacturing and jewelry, but primarily its utility is in its effectiveness as a store of value. In the past, it's use as a currency was the primary source of utility, but that is gone now.

The primary utility in cryptocurrencies is in their use as a currency. People acquire coins so they can spend them and that makes the coins valuable. It would be reasonable to say that the "intrinsic" value of a cryptocurrency relies on its use as a currency.

Now we come to Bitcoin, which is no longer useful as a currency (hopefully, this is only temporary). Speculators that understand the situation and want Bitcoin to be valuable claim that the utility of Bitcoin now relies solely on its effectiveness as a store of value. The problem with a primary utility as a store of value is that it is only useful if there is value to store, thus it is susceptible to positive feedback loops, such as speculative bubbles, and the value could drop to 0 at any time.

There are  many example of speculative bubbles where people want to own an asset only because they expect the value to rise. The same can be said about Bitcoin. Bitcoin's rising price is justified by claiming that the rising price proves that Bitcoin is an excellent store of value, and therefore it has the utility to support the higher price. Unfortunately, that is circular reasoning and we know all where it will lead.

TL;DR: A cryptocurrency derives it value from its use as a currency, or more specifically, the expectation of its future use. Store of value alone is not sufficient. Bitcoin is doomed unless it can become usable as a currency.

[tinopener]

Store of value alone is not sufficient. Bitcoin is doomed unless it can become usable as a currency.

Store of value is enough for gold. I can't exchange gold for coffee at Starbucks.

What about antique value of limited artefacts though?

Even if Bitcoin isn't a store of value, or a currency, won't it always be an antique?

(hehehe, sorry, just playing devil's advocate)

[tinopener]

Interesting perspective.

I think bitcoin's value lies both in its ability to move wealth effortlessly across borders as well as being the digital equivalent of the US Dollar, in that the other crypto-currencies are traded against btc, just like commodities are traded in dollars.

But what if it becomes like a new "consumer prices index"?

What if Bitcoin becomes the new Zero?

Numbers existed before Zero did.

[Fileiro]

Interesting perspective.

I think bitcoin's value lies both in its ability to move wealth effortlessly across borders as well as being the digital equivalent of the US Dollar, in that the other crypto-currencies are traded against btc, just like commodities are traded in dollars.

But what if it becomes like a new "consumer prices index"?

What if Bitcoin becomes the new Zero?

Numbers existed before Zero did.

I'm not sure I understand what you mean with New Zero, but if you're asking if I think bitcoin will one day be worth nothing, then yeah, anything can become worthless.

I just don't worry too much about bitcoin going to zero because a. I don't own a lot of bitcoins and b. If it goes to zero some other crypto-currency will have replaced it due to being more useful.

Personally, I see a lot of merit in the argument that we are in the beginning of the process of moving from fiat currencies to crypto-currencies, just as humans moved from precious metal currencies to paper.

Doesn't really matter what happens to bitcoin in the long run, crypto-currency is here to stay, IMHO.