What is the intrinsic value of Bitcoin? What are Bitcoin’s fundamentals? What is its cash flow, earnings, coupon, yield?
An asset with no intrinsic value is not an investment, it’s a trade. More specifically, it’s a greater fool trade.
Fiat money, the pieces of paper in your wallet, has no intrinsic value*. We are willing to accept it for goods and services because we know we can trade it for more goods and services. This makes it an established medium of exchange.
Bitcoin’s true potential lies in its ability to serve as a global medium of exchange. The people buying bitcoin as a speculative asset are doing the community a huge disservice because they take bitcoin out of circulation and spend dollars instead. Bitcoin cannot establish itself as a medium of exchange if no one actually uses it to buy stuff.
Bitcoins aren’t assets. They exist only as entries in a public ledger. Owning bitcoin doesn’t mean having a banknote in a digital wallet; it means having the right to transfer a balance to someone else.
Bitcoin has no central bank to prop up its value. As long as Bitcoin is treated as an investment, its only value will derive from the existence of a greater fool willing to buy that balance.
The good news is that Bitcoin is totally rallying this week if your investments are denominated in Mexican Pesos.
*Guess what, your dollars aren’t even really money. The top of a paper bill says “Federal Reserve Note”. It’s a contract that says the Federal Reserve owes you something. Don’t you feel silly accepting a Federal IOU for that lapdance you gave earlier this evening!
1. Bitcoin and the Digital-Currency Revolution –wsj