Rudy Fares
The discussion among investors has existed since the pseudonym Satoshi Nakamoto created the first cryptocurrency, Bitcoin, in 2009. Are cryptocurrencies worthless or a good investment? After cryptocurrencies had to take severe price losses in the past few days, the old question about the true value of currencies comes up again. The question of the value of cryptocurrencies is a philosophical one. In this article, we go back to the basics to understand what “value” is,
If you owned all the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it.
Warren Buffet
In General, how is “Value” defined?
Warren Buffett himself once coined the phrase: “Price is what you pay, value is what you get”. While prices in a market economy are determined by the interplay of supply and demand – high demand means high prices, “value” has to be defined differently. Although the price provides information about the value of an item, this value is different for everyone. If this were not the case, there would be no economy. But what about the value of Bitcoin?
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What is the value of Bitcoin?
The Bitcoin price is currently around $29,000. For Bitcoin, however, views of value differ widely. This is how some investors see the cryptocurrency above $100,000 per coin. Others, like Buffett, see Bitcoin’s value as zero. The value of Bitcoin can currently only be guessed by its use case. With its revolutionary technology, Bitcoin can change the global economy through the decentralized system and open up completely new opportunities for companies. The value of Bitcoin can therefore only be estimated via its blockchain technology and its opportunities and risks. For some, the future of blockchain technology may be surreal and never take place – others see the future of the economy as purely decentralized.
How to assess the value of a Cryptocurrency?
While the price of Bitcoin is primarily media-driven, many Altcoins can boast revolutionary blockchains (compared to Bitcoin). If you see cryptocurrencies such as Ethereum, Fantom, Solana and Co not as currencies but as companies, their value can suddenly be classified much higher. For example, Ethereum, the little brother of Bitcoin, offers a platform for NFT, smart contracts, and a number of other innovations on the blockchain. A basis which, if it were in the hands of a classic company, could be valued at billions.
Are Cryptocurrencies companies?
By definition, cryptocurrencies are not companies. However, if you want to invest in cryptocurrencies and determine their value, it helps to look at cryptocurrencies as a company. So you can ask yourself who has the best blockchain, the highest user growth, and the largest community. Questions that investors would also ask themselves about companies.
Are Cryptocurrencies worthless?
In conclusion, cryptocurrencies are not necessarily worthless investments. While their value comes from supply and demand, it is not the only indicator. Above all, the future prospects, the technology, and possible applications form the value of a currency. If you see them as a company, the value of a currency is easier to determine objectively.
However, since supply and demand also play a role in value, Buffett’s statement makes sense. A currency that is wholly in the hands of one person is worthless. However, if you see Bitcoin as a company that enables certain applications, as described, the value would also come about if only one person held the currency.
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