{"id":366962,"date":"2021-11-14T17:00:35","date_gmt":"2021-11-14T14:00:35","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/what-is-bitcoins-fundamental-value\/"},"modified":"2021-11-14T17:00:35","modified_gmt":"2021-11-14T14:00:35","slug":"what-is-bitcoins-fundamental-value","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/what-is-bitcoins-fundamental-value\/","title":{"rendered":"#What is Bitcoin\u2019s fundamental value?"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3bf15a09995\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3bf15a09995\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-bitcoins-fundamental-value\/#Calculating_fundamental_values\" >Calculating fundamental values<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-bitcoins-fundamental-value\/#Fundamentals_for_cryptocurrencies\" >Fundamentals for cryptocurrencies<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-bitcoins-fundamental-value\/#Bitcoin_as_digital_gold\" >Bitcoin as digital gold<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/what-is-bitcoins-fundamental-value\/#Here_we_go_again\" >Here we go again<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#What is Bitcoin\u2019s fundamental value?<\/strong>&#8221;<\/p>\n<div>As it hits new highs, there is no shortage of bold predictions about Bitcoin <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.forbes.com\/sites\/billybambrough\/2021\/11\/02\/crypto-price-prediction-bitcoin-could-hit-100000-before-the-end-of-2021-but-lacks-ethereum-intensity\/?sh=392b38e96b7d\">reaching US$100,000<\/a> or more.<\/p>\n<p>Often these are based on not much more than extrapolations by people with vested interests: the price has gone up a lot so it will keep going up. If it gets above its previous high, it must keep going up.<\/p>\n<p><iframe loading=\"lazy\" src=\"https:\/\/fast.wistia.net\/embed\/iframe\/wkot1zfukh?videoFoam=true&amp;autoPlay=true\" title=\"\" allowtransparency=\"true\" frameborder=\"0\" scrolling=\"no\" class=\"wistia_embed\" name=\"wistia_embed\" allowfullscreen=\"\" msallowfullscreen=\"\" width=\"100%\" height=\"100%\"><\/iframe><\/p>\n<p>There is also \u201ccharting\u201d or \u201ctechnical analysis\u201d \u2013 looking at graphs and seeing patterns in them. There may be fancy terms such as \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/cointelegraph.com\/news\/analysts-expect-parabolic-bitcoin-price-move-after-the-last-resistance-at-67k-falls\">resistance levels<\/a>\u201d and \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/t\/tenkansen.asp#:%7E:text=Tenkan-sen%2C%20or%20conversion%20line%2C%20crates%20a%20moving%20average,information%20in%20a%20single%20view%20for%20technical%20analysts.\">Tenkan-Sen<\/a>\u201d. There is talk about \u201c<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/seekingalpha.com\/article\/4459569-bitcoin-fundamentals-and-technicals-tell-the-same-story\">fundamentals<\/a>\u201d.<\/p>\n<p>Let\u2019s examine this last idea. Does Bitcoin have a fundamental value?<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Calculating_fundamental_values\"><\/span>Calculating fundamental values<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A fundamental value in traditional financial speak means a value based on what return (or cash flow) is generated by an asset. Think of an <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>le tree. To an investor, its fundamental value is in the apples it produces.<\/p>\n<p>In the case of company shares, the fundamental value is the dividend paid from profits. A standard measure used by investors is the price-to-earnings ratio. In property, the fundamental value reflects the rent the investor earns (or the owner-occupier saves). For a bond, the value depends on the interest it pays.<\/p>\n<p>Gold has a fundamental value also, based on its use for jewelry, dental fillings, or electronics. But this value is not why most people buy gold.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Fundamentals_for_cryptocurrencies\"><\/span>Fundamentals for cryptocurrencies<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>National currencies are different. Their value is in being a trusted and accepted unit of exchange.<\/p>\n<p>In the past coins made with gold and silver had a fundamental value because they could be melted down for their precious metals. That\u2019s no longer the case with fiat currencies, whose value depends solely on people trusting that others accept them at face value.<\/p>\n<p>Most cryptocurrencies, such as Bitcoin, Ethereum, and Dogecoin are essentially private <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=3888752\">fiat currencies<\/a>. They have no corresponding assets or returns. This makes it hard to determine a fundamental value.<\/p>\n<p>In September analysts with Britain\u2019s Standard Chartered Bank <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.nasdaq.com\/articles\/%24789-billion-standard-chartered-sees-bitcoin-hitting-%24100000-by-early-next-year-2021-09-08\">argued<\/a> Bitcoin could peak at about US$100,000 by the end of 2021. \u201cAs a medium of exchange, Bitcoin may become the dominant peer-to-peer payment method for the global unbanked in a future cashless world,\u201d said the head of the bank\u2019s crypto research team, Geoffrey Kendrick (a former Australian Treasury official).<\/p>\n<p>Theoretically, this could be possible. Globally an estimated <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.brinknews.com\/bridging-the-digital-divide-to-widen-financial-services-in-central-asia\/\">1.7 billion people<\/a> lack access to banking services. But Bitcoin has been spruiked as the future of payments since its invention in 2008. It has made little progress.<\/p>\n<p>There are at least two significant barriers. First is the computational grunt needed to process payments. <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">Technology<\/a> may overcome this. The second obstacle is harder: the volatility of its price.<\/p>\n<p>Digital currencies that can maintain a stable value are more likely to become payment instruments. These include the existing stablecoins, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.reuters.com\/technology\/facebook-backed-crypto-project-diem-launch-us-stablecoin-major-shift-2021-05-12\/\">Meta\u2019s mooted Diem<\/a> and <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bis.org\/publ\/work976.pdf\">central bank digital currencies<\/a>, already <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.sanddollar.bs\/\">operational<\/a> in some Caribbean economies.<\/p>\n<p>So far the only significant company to have accepted payments in Bitcoin is Tesla, which announced this policy in March only to reverse <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bbc.com\/news\/business-57096305\">it in May<\/a>.<\/p>\n<p>The only country to adopt Bitcoin as an approved currency is El Salvador (which also uses the US dollar). But it is far from clear what benefits there are. The laws forcing businesses to accept the cryptocurrency have also led to protests.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Bitcoin_as_digital_gold\"><\/span>Bitcoin as digital gold<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>If Bitcoin has no real value as a widespread means of payment, what about as a store of value, like digital gold? It does have this advantage over most of the \u201caltcoins\u201d. Its supply, like gold, is (arguably) limited.<\/p>\n<p>One tool used by crypto enthusiasts to compare Bitcoin\u2019s scarcity with gold is called the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.cointree.com\/learn\/bitcoins-stock-to-flow-model\/\">\u201cstock-to-flow\u201d model<\/a>. This approach claims gold holds its value because the existing stock of gold is 60 times more than the amount of new gold mined each year. The stock of Bitcoin is more than 50 times than the new coins \u201cmined\u201d annually.<\/p>\n<p>But this does not explain why Bitcoin\u2019s price halved earlier this year. Nor does it have any theoretical basis in economics: prices don\u2019t depend just on supply.<\/p>\n<p>Some <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/markets.businessinsider.com\/news\/currencies\/cathie-wood-bitcoin-price-prediction-jump-500000-ether-confidence-high-2021-9\">Bitcoin promoters<\/a> predict higher prices on the assumption funds managers will eventually invest an arbitrary proportion, say 5%, of their funds in Bitcoin.<\/p>\n<p>But such predictions implicitly assume Bitcoin, as the largest and best-known cryptocurrency, will continue to maintain its dominant position in the crypto market. This is not guaranteed. And there is no limit to the number of cryptocurrency alternatives.<\/p>\n<p>Remember Bankcard? This credit card company once had 90% of the Australian market in the early 1980s. It was defunct by 2006. What about MySpace? Before 2008 it was a bigger social networking site than <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Facebook<\/a>.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Here_we_go_again\"><\/span>Here we go again<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>In September <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.economist.com\/leaders\/2021\/09\/18\/the-beguiling-promise-of-decentralised-finance\">The Economist<\/a> argued Bitcoin \u201cis now a distraction\u201d to the future of decentralized finance, with rival blockchain cryptocurrency Ethereum \u201creaching critical mass\u201d.<\/p>\n<p>There are parallels between the Bitcoin bubble and the dotcom bubble of 2000, driven by overly optimistic assumptions about new technologies \u2013 and human greed.<\/p>\n<p>Just as a few stars such as Amazon emerged from the wreckage of the dot.com bubble, so it is possible some applications of the blockchain technology underlying Bitcoin have enduring utility. But I doubt Bitcoin will be one of them.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img decoding=\"async\" loading=\"lazy\" style=\"border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;\" alt=\"The Conversation\" width=\"1\" height=\"1\" class=\"js-lazy\" src=\"https:\/\/counter.theconversation.com\/content\/171387\/count.gif?distributor=republish-lightbox-basic\"\/><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https:\/\/theconversation.com\/republishing-guidelines --><\/p>\n<p><noscript><img decoding=\"async\" loading=\"lazy\" style=\"border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;\" src=\"https:\/\/counter.theconversation.com\/content\/171387\/count.gif?distributor=republish-lightbox-basic\" alt=\"The Conversation\" width=\"1\" height=\"1\" class=\"\" srcset=\"\"\/><\/noscript><\/p>\n<p><em>This article by <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/profiles\/john-hawkins-746285\">John Hawkins<\/a>, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/institutions\/university-of-canberra-865\">University of Canberra, <\/a>is republished from <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\">The Conversation<\/a> under a Creative Commons license. Read the <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/theconversation.com\/what-is-bitcoins-fundamental-value-thats-a-good-question-171387\">original article<\/a>.<\/em><\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more like this article, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/technology\/\" target=\"_blank\" rel=\"noopener\">Technology category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/thenextweb.com\/news\/what-is-bitcoin-fundamental-value-syndication\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;#What is Bitcoin\u2019s fundamental value?&#8221; As it hits new highs, there is no shortage of bold predictions about Bitcoin reaching US$100,000 or more. Often these are based on not much more than extrapolations by people with vested interests: the price has gone up a lot so it will keep going up. If it gets above&#8230;<\/p>\n","protected":false},"author":1,"featured_media":366963,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/img-cdn.tnwcdn.com\/image\/hardfork?filter_last=1&fit=1280,640&url=https:\/\/cdn0.tnwcdn.com\/wp-content\/blogs.dir\/1\/files\/2021\/10\/BitcoinRock.jpg&signature=45bce8af956740e654366d53b87be38b","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-366962","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/366962","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=366962"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/366962\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/366963"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=366962"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=366962"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=366962"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}