What is the intrinsic value of Bitcoin? Intrinsic value? How can a virtual currency have any intrinsic value? Let’s ask that question in a different way. What should Bitcoin’s value be in order for it to represent value?
Putting a value on currency is tricky business. What is the value of a U.S. dollar? How does it compare to other currencies around the world? That calculation has to do with the underlying value of the U.S., the U.S. economy, the money supply, the trade deficit, and a dozen other factors. In the end, people get a sense of the value of a dollar by seeing what can be purchased with dollars. That’s not possible, yet, with Bitcoin. There aren’t enough things to buy or exchanges to use.
If something is very easy to manufacture, chances are it will not cost very much. A producer should be able to buy raw materials, do the manufacturing, sell the finished product, and be able to keep some extra money generated in the process. If too much money is generated, more people do manufacturing. If not enough money is generated, the price goes up and there are scarcities. You can’t buy a good, natural bristle painter’s brush today because they are difficult to make and not enough painters use them.
We are just at the beginning of cryptocurrencies being used to represent commerce online in a virtual world but their uses are varied and many. However, we have hundreds of examples where cryptocurrency does a better job than fiat currency. Countries are adopting Bitcoin where their own currency was not working well. People are able to send money great distances, securely, by using Bitcoin and avoiding banks.
Let’s say Bitcoin is used for purchasing homes. There are 5.5 million new and existing homes bought and sold each year in the United States. The average price of a home is $188,900. In other words, one trillion dollars in homes are marketed each year. If a person bought Bitcoin in preparation for purchasing a home and held it a year, there would have to be one trillion dollars in Bitcoin available just for home marketing. A single Bitcoin would have a value of $62,587.35 because there is roughly 16,600,000 Bitcoin of the 21,000,000 that will ever be mined already out there.
Add to the one trillion in homes the value of all cars, all jewelry, all food, all sporting equipment, all drugs, all hospital stays, all doctor visits, all tuition, all theatrical tickets, all salaries, all tips, all publications, all subscriptions, all art, all military equipment, all aircraft, and everything else you can buy with a credit card.