The Bitcoin value argument

Whether or not Bitcoin is “money”, or “a currency”, or neither, it has undeniable value, in that some people are ready to buy or sell some for a price.

Some will say it’s a hype, because Bitcoin’s value is not really linked to its power to buy stuff. Sure you *can* buy things with bitcoins but it doesn’t seem to be its main strength for the moment.

Nevertheless, there is a de facto near-consensus (depending on which exchange you use) on the price of 1 BTC, which evolves according to supply and demand. That price is Bitcoin’s actual value.

But, *should* Bitcoin have value? Nobody can really answer. But it does.

The same way a Picasso, or a collection stamp, or a Google share has value. Or a gold coin, or a diamond. Can you pay your coffee with any of those? Probably not. Can you find someone who would be willing to trade a USD 1M house for a USD 1M worth of those? Probably.

Is it theoretically possible that Picasso’s paintings suddenly lose value, partially or completely? Yes. Same with collection stamps and diamonds.

Would this value loss be related to the value of canvas and oil? Probably not. Same with the value collection stamps not being linked to the price of mail postage, and the price of diamonds not linked to their efficiency at being a very hard material. To put it bluntly, Picasso paintings, collection stamps, gold, and diamonds are rare. And there are people who value this rarity as a convenient way to calculate the value of other things.

But in the end, it is all connected to context. In times of war, where food becomes scarcer and black markets emerge, gold and diamonds retain some kind of trading convenience value, but might not be as valuable as before the war. Meanwhile, Picasso paintings value drops. And the price of a can of SPAM however soars, not because it is a “bubble”, but because more people suddenly find it attractive than in peace times.

To assess Bitcoin’s value, looking at what makes it attractive is somewhat irrelevant. The real question is whether or not it will retain its value. Some argue that because it is not backed by something tangible like gold, it is doomed die. To survive it needs only two factors: a) people who have money invested in it, and b) people who have a use for it. It is clearly established that both requirements are currently met. And because Bitcoin is not issued nor owned by one single entity (unlike USD and Second Life money), the balance between these two elements (those who have some and wont sell below a certain price, and those who want some and won’t pay more than a certain price) is what will drive Bitcoin’s value as long as they both exist.

Comments welcome at @ZLOK

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