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And what justifies gold being worth any particular amount of money? The answer is the same: nothing. Except that that's not true for gold and it's not true fo
by ars 4y ago
And what justifies gold being worth any particular amount of money?
The answer is the same: nothing.
Except that that's not true for gold and it's not true for Bitcoin. Something has value if people want it.
That's it.
People want Bitcoin, therefore it has value.
Your search for fundamentals is simply inappropriately applied. It's like asking what color is a smell, it's simply the wrong question.
- adam_arthur 4y agoGold's intrinsic value is defined by its chemical properties and value for use in manufacturing. A large percentage of mined gold is used for productive purposes, not simply to sit in a vault. Companies buy gold for use in electronics manufacturing, believe it or not. But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC. Except for BTC the intrinsic portion is close to 0.
- datadata 4y agoAir has a extremely high intrinsic value for its use in keeping humans alive. Yet the price of air is zero. Intrinsic value does not determine the price of something, the only determination of price is by a market.
- adam_arthur 4y agoIts price is 0 because there are vast quantities of it. Price is a function of both supply/demand, with intrinsic value creating the rationale for the demand. I bet air would sell for a lot more out in Space or at the bottom of the ocean There is no rationale to the demand for Bitcoin beyond a greater fool, or edge use cases like illicit transactions. It's obvious that 95%+ of people buying Bitcoin are doing it to make USD returns.
- datadata 4y agoIn your belief system, what perpetuates for example the price difference between a .com domain and a .net domain? Is there an intrinsic value of .com over .net? Or do you believe that they should be equally priced.
- adam_arthur 4y agoThe intrinsic value of one domain over the other is the signal it sends to your customers. If .com is culturally considered higher quality and thus will drive more business to you, then it carries a higher value than .net But perceptions of value can change over time. This is not my belief system by the way, this is how the intrinsic value of something is determined.
- datadata 4y agoSo a cultural convention for consensus on using a particular TLD is part of your definition of intrinsic value for a domain name. But for gold, the monetary premium for a similar social consensus is entirely distinct from the intrinsic value: > But a portion of gold's market value is driven by a speculative spread over the intrinsic value, similar to BTC. What is the definition of intrinsic value that allows both of these interpretations to be true?
- adam_arthur 4y agoBecause marketing and appeal drives revenue for your business. It's a multi variate system where the values aren't known, but they're there all the same. Buying gold and storing it in your basement is just speculation. It doesn't provide any value on its own. You aren't using the gold for any immediate purpose, but just hoping that value increases beyond the market value in use for production. Gold could have some intrinsic value as a signaling tool via jewelry etc, and this could conceivably drive value. But you can't wear bitcoin
- datadata 4y agoThanks for elaborating, I think this distinction does actually make sense. I do however still think that the this definition of intrinsic value does not really matter for justifying a "real" price. The intrinsic value ultimately is still backed by transactions that are at some point themselves market set prices without intrinsic value. There isn't any natural law that would say fix the price of 2 oranges to 1 apple that could support any particular trade. You could also for example use this definition to talk about the intrinsic value of equity in a bitcoin only exchange (from trading fees), which would obviously become zero if bitcoin went to zero.