Listen to various Bitcoin critics for long enough and you’ll inevitably hear the argument that Bitcoin can’t possibly succeed because it doesn’t have any intrinsic value. You can’t hold a bitcoin in your hand, you can’t wear it, you can’t do anything with it besides trade it to someone else.
Gold bugs love to point out that unlike bitcoin, gold is used in all sorts of industries such as electronics, jewelry and dentistry. Establishment fiat investors and economists love to point out that unlike stocks, bonds and farmland, bitcoin does not produce anything. However, what both groups fail to understand is that these are not bugs, but rather very key features of Bitcoin.
Intrinsic Value
To fully understand how to go about answering the question of Bitcoin’s intrinsic value, we must first define intrinsic value itself.
Investopedia defines intrinsic value[1] as, “A measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model, rather than using the current market price of the asset.”
This definition, to put it bluntly, is useless. Who decides which objective calculation or complex model to use? How do we determine which inputs and variables to include in these calculations?
There is no such thing as “intrinsic value” in the sense of an object having objective value in and of itself. As a thought experiment, think of assets typically assumed to hold intrinsic value such as gold, farmland, stocks and real estate. Now imagine a world where no humans exist. Do these assets still have value? The answer has to be no, because value only makes sense in the context of human existence.
Therefore the entire concept of intrinsic value is based upon a false premise: Value can be separated
