I must admit I still don’t understand Bitcoin and other crypto currencies.
I can understand that the value of these assets is based on supply and demand. The supply of Bitcoin is limited to a finite amount of Bitcoin which miners can produce. And then the demand side has ballooned the asset value of Bitcoin over the years, as investors, and ordinary people without big bucks, buy Bitcoin.
But is there any intrinsic value to Bitcoin, beyond the belief of buyers and sellers that this intangible asset has value because they all believe it has value?
For example, if you buy land, or a house, or commercial property, you are buying an asset with some tangible value or uses. If you buy a business, or buy stock in a business, you are investing in an entity which produces a product, or sells goods and services, which provides a certain value to the assets involved in that business.
What is the corresponding tangible value of Bitcoin? What is Bitcoin beyond being a series of blockchain transactions being compiled on the internet? Is there any tangible underlying value to Bitcoin assets?
Or perhaps I just don’t understand why Bitcoin has zoomed up in value to tens of thousands of dollars from close to zero ten years ago? I can understand that based on supply and demand, the value of Bitcoin is there because willing buyers and sellers agree to the sale of Bitcoin at those prices.
But will someone eventually be left holding the bag on Bitcoin assets??
It’s a currency, not an investment. You are buying the ability to transfer value using the blockchain.
Is the currency of any significant state backed by anything other than a collective agreement in its value? Full faith and credit doesn’t hold what it used it.
The fact that it cannot be inflated out of existence is a good thing.
There are a lot of reasons why it has value. If you are worried about holding the bag…the change in your pocket is worth 7% less than it was last year. That is a much bigger bag.