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I think a lot of confusion stems from conflating "value" and "price". Bitcoin has no intrinsic value. To be fair, neither does a dollar (but nobody's suggesting
by the_gastropod 8y ago
I think a lot of confusion stems from conflating "value" and "price". Bitcoin has no intrinsic value. To be fair, neither does a dollar (but nobody's suggesting investing in dollars is a good idea, so that's another subject).
Things with intrinsic value (aka things that produce cash flow, like stocks, bonds, real estate, etc.) can be somewhat rationally priced based on their expected returns & risk profiles. Things without intrinsic value (gold, bitcoin, beanie babies, etc.) are priced primarily by speculation. BUT, gold, for example, has a built-in floor and ceiling price: since it's useful for electronics and medical purposes, its price cannot go to 0. Similarly, if the price gets high enough, mining becomes profitable, increasing supply, driving the price back down. Being a non-physical thing, Bitcoin has neither of these mechanisms, so its price can, as we've seen, flail around bounded only by investor greed.
- X6S1x6Okd1st 8y agoPlenty of people think investing in dollars is a good idea. Those people generally currently have a currency that is inflating faster than usd
- anoncoward111 8y agoThis is the correct answer. Anything that has a use to someone has intrinsic value. The price is what they offer to pay in hopes of convincing the current owner to give it to them.
- lottin 8y agoThe notion of intrinsic value was abandoned by economists more than a hundred years ago. In modern economics, value is subjective. Market prices simply reflect the value individuals place on goods and services.
- checkyoursudo 8y agoSometimes market prices reflect the value some individuals think other individuals will place on things. Which leads back to how something can be over/under-valued.
- geezerjay 8y ago> To be fair, neither does a dollar That statement is false for a number of reasons, among which the fact that the US taxpayers have to pay their taxes in dollars and thus the value of a dollar is pegged to the value of the average worker's anual income.