Is bitcoin in a bubble? Does it have inherent value?

FUD getting you down? Have no fear. The FUDbusters are here, dispelling the most common
bitcoin-related myths you might have come across. This time we'll be looking at the idea that bitcoin is a bubble
with no inherent value. What does Bitcoin do? It's a common question, and
certainly a sensible one to ask before making any investment. But ask different people and you might get many different answers. Some will tell you bitcoin is
a store of value to be saved. Some, that it's a currency to be spent. The answer is that they're both right. Bitcoin is so unique because
it is both digital gold but can also be used as money. This is a tricky concept to grasp, and that's sort of understandable as no other asset has these qualities. Many have unfortunately seen
this ambiguity as evidence that it's neither and
subsequently valueless. The short answer is, they're wrong. When it comes to valuing
any asset or currency, we can look at two aspects: perceived value, and
intrinsic or inherent value.

Perceived value is assigned
when a collective believes something has value. It should be clear to all that Bitcoin's perceived
value is now high. The market capitalisation
crossed a major milestone on 19 February, surpassing 1 trillion, bigger than Facebook, Visa and
JPMorgan, to name but a few. There's also a huge
number of people using it. In 2021, there are over
100 million bitcoin wallets with positive balances, while the number of active
daily bitcoin wallets has reached an average of 1 million. These now include many major corporations, including Tesla, Motley Fool,
MicroStrategy, and more. Bitcoin's intrinsic or inherent value is more difficult to define. If we're talking about
Bitcoin as a store of value, we can talk about the
technology that underpins it, the blockchain. Blockchain technology
gives Bitcoin its value because it's immutable,
it's never been hacked, and it has a fixed supply. That fixed supply doesn't necessarily
give it value in itself, but it increases the
value that it does have.

If we think of Bitcoin
as a medium of exchange, the answer becomes less clear. However, this is a problem
that's true of all currency. The entire concept of money really comes down to perceived value. What makes the rands or dollars or euros in your bank
account worth anything? The US dollar moved away from
the Gold Standard in 1971, the monetary system where a
country's currency had a value directly linked to gold. Today, no government-issued
currency in existence is backed by any tangible asset. It all comes down to faith and use. As we have seen, Bitcoin is
being used, it's trusted, and it has the technology
to warrant that trust. The moral here, guys, is that just because we can't define its
value in familiar terms doesn't mean it has none.

Bitcoin's ubiquity within today's world is a clear indication that technology isn't
going away anytime soon and that value will only
grow moving forward. So next time someone
hits you with this FUD, you've got the ammo to fight back. Don't forget to like, comment, subscribe. And as always.

You May Also Like