The real value of Bitcoin

Bitcoin bubble

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As debate continues on whether the B in Bitcoin is to be capitalised or not, the BTC/USD pair hit $4,980 over the weekend, which is actually $5,000 for most traders looking to buy on cryptocurrency exchanges once the spread is included. That the price has skyrocketed over 300% in 2017 alone is an impressive and well-known statistic, but what’s really interesting is that its meteoric rise has also pulled up other blockchain currencies and technologies. Everything in the cryptocurrency arena has risen hundreds of percentage points in value within a matter of months.

Resembling the .com bubble of 2000 far too much for my comfort level, my Uber driver is recommending taking a stake in the most obscure, but most promising cryptocurrency. If this is not an indication that we’re near the top of this massive speculative bubble, I don’t know what it is.

The reality is, nobody really knows how much each individual Bitcoin is fundamentally worth.

For many technology and financial markets commentators, it’s still a solution looking for a problem. Its current valuation is based on hypothetical and prospective uses for the technology. There is nothing you can do with it that you can’t already do with the US dollar, except perhaps deal in black-market goods. I’m hearing random valuation numbers thrown around, $5,000 US dollars per Bitcoin, $10,000, $1,000,000… but none of them seem to be grounded in fundamentals. These numbers become even more abstract when literally hundreds of other cryptocurrencies could easily rise up and take the market capitalisation crown away from Bitcoin.

As Jason Bloomberg notes in his June 26th article in Forbes, ‘Never before in the history of commerce has a speculative bubble developed around an asset that had no clear intrinsic value.’ Contrary to this, it could be argued that Bitcoin only offers intrinsic value, as the digital world cryptocurrency is not backed by any government inherently, giving it no extrinsic value.

Money demand can be assessed by the number of transactions a currency performs within a time frame, but with cryptocurrencies, this is also virtually impossible to determine. The resonance with .com bubble is just too strong to ignore, giving me every indication that this too will pop. Once it does, we might get a more realistic value of virtual currencies, though I’d say there’s roughly a couple of weeks to a couple of months left of this party, based off current sentiment and levels of irrational exuberance alone. Admittedly, I’m not willing to put money on this prediction.


Bitcoin pings the $5,000 mark, but we’re still questioning its real value


As Bitcoin hits the $5,000 threshold, the skeptic in us feels that its meteoric climb resembles the .com bubble of 2000 far too much for comfort. In this article, we consider Bitcoin’s inherent value, based on the wider financial context of its performance and on what it offers intrinsically.

BTCUSD future price

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The real value of Bitcoin


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