Bitcoin doesn't have a "real worth". It is not backed by any sort of resource. Bitcoin is considered valuable for the same reason gold is valuable; it is difficult to acquire, there is a limited quantity of it, and people are willing to pay a relatively high sum for it. Feb 13, · Aside from bitcoin, which is the real progenitor of them all, other well-known alternative currencies include Ethereum, Ripple and Litecoin. We take a look at the pros and cons of each, and how. Dec 11, · Investors have taken a shine to bitcoin lately, as the price of the cryptocurrency has jumped over the $20, mark this past month. But for a store of .
What is the real value of a bitcoinBitcoin will never be a real currency, this investor says - Cantech Letter
Bitcoin's narrative began with it being an instrument for instant, easy, and anonymous transferring of funds. It was, for all intents and purposes, to be a currency. But as it stands today, Bitcoin is way too volatile to be used as a currency by the masses Volatility is the last thing you want in your currency. Among other reasons, that's because the settlement of transactions takes time. There's really no such thing as an instant transaction.
Even digital transactions take time, albeit a very short amount of time. Currency volatility can be a major problem for both retailers and customers. And even though there are many online retailers that now accept Bitcoin, some are now ending its payment support because of the crypto's price volatility.
In , Stripe became one of the first major payment processors to support Bitcoin payments. But the company recently announced it will end support for Bitcoin as a payment method in April:.
Transaction confirmation times have risen substantially; this, in turn, has led to an increase in the failure rate of transactions denominated in fiat currencies.
At the end of the day, Bitcoin's volatility makes it a poor form of money to be used on a large scale by retailers and consumers.
Bitcoin's volatility may change in the future. But for now, Bitcoin is too unstable to be sound money. The Best Free Investment You'll Ever Make Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets.
All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below. Well, there are many opinions about the nature of Bitcoin's value. But as a long-time student of the gold market, I have an alternative perspective on Bitcoin's value. Bitcoin has always been compared to gold. Gold and Bitcoin both have finite supplies.
And they're both monetary and wealth storage assets independent of government. Neither Bitcoin nor gold produce any income, either. You can't eat, grow food on, gather water from, live on top of, or otherwise physically use Bitcoin or gold, other than for exchange.
Gold has some limited utility in the industrial sector. But aside from limited utility, both are mostly useless to the masses. Other than sell it for cash, what would you actually do with a million ounces of gold?
Look at it in a bank safe? What would you actually do with a million Bitcoin? You couldn't even physically look at it. Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it.
It has no utility. Anyone watching from Mars would be scratching their head. The same can be said of Bitcoin: Bitcoin gets electronically mined in China, or someplace. Then we digitally store it on a server and pay exchanges and miners to guard it.
Well, again, there are many opinions on why gold has any value. But from my perspective, it's all about faith. Here's what I mean Fervent gold bugs will argue until they're blue in the face that gold has a natural "intrinsic value. When people mistrust the government or believe it's at risk, their faith in the establishment naturally shifts to independent systems. The government doesn't control the supply or value of gold. So, when people mistrust the government, they seek out independence in gold.
This is what ultimately drives gold's value today. Bitcoin is also an independent monetary and wealth storage system. There is no government controlling the supply or value of Bitcoin.
And if you ask them, many of the crypto-obsessed would tell you Bitcoin's independence from government is one of its defining and most valuable characteristics. According to Warren Buffett, the most influential investor in the world, the answer to this question would be: not much. We will try as well to answer to this question using two concepts in economics and finance: minimal or residual value and Ponzi schemes.
The minimal value approach is a prudent approach. Under this approach we would like to know what value remains when everything goes wrong as in cases of market disruption or economic crisis. Before we try to value a bitcoin we would need to define it as a currency or as an investment. Its use as a means of payment with some merchants can lead us to see the bitcoin as a currency not tied to a country and without central bank.
Bitcoins are usually measured in terms of their exchange rate to the Japanese Yen and US dollar as these two currencies remain the main currencies for which bitcoins are exchanged. All major currencies have a central bank that monitors the exchange rate of their currency respective to other currencies and mostly to the dollar.
Contrary to most traded currencies, bitcoin does not have a central bank or an entity monitoring its exchange rate. Therefore, bitcoin exchange rate to the dollar or to the Japanese yen could theoretically go down to zero.
As some academics and practitioners would qualify it bitcoin cannot be considered as a currency but as an investment. Bitcoins do not generate any present or future revenues.
Therefore, as an investment and using a minimal value approach bitcoins have a zero minimal value. Some assets do not generate revenues, the best known unproductive asset being gold. Bitcoin has frequently been compared to gold given that it cannot be considered as a currency but like an investment that generates no revenues. Using our minimal-value approach, we can assume that gold has a minimal market value due to its industrial use.
Indeed, the value as an industrial good of gold would become the minimal value even if it would have no value as a financial investment.
Again, bitcoin at this stage does not have any industrial use and could not pretend to such minimal value. That said, to avoid a totally biased view of the bitcoin, we could argue on one potential value for it as an investment — finance methods see a value in diversification.
For asset managers with large investment portfolios, one value of bitcoin could therefore come from the fact that bitcoin is not fully correlated to financial markets. Then after all we have seen, why do bitcoins have a value on the market?