The Intrinsic Value of Bitcoin (Part 1): Scarcity

Expert Thought on the Intrinsic Value of Bitcoin

There are many within the financial industry who believe that Bitcoin and other cryptocurrencies have no inherent value. Albert Mohler, a prominent commentator on cultural and theological issues, says, “The point is this, there is nothing of inherent value behind these cryptocurrencies, or at least most of them. Instead, at least one of the reasons why cryptocurrency was developed was to create a form of currency independent of governments.” Additionally, American geopolitical analyst and best-selling author Peter Zeihan has expressed his negative views on Bitcoin, stating that it is “intrinsically worthless” and would ultimately go to zero.

However, as outlined in our previous article, the intrinsic value of Bitcoin is derived from its unique properties as a decentralized, censorship-resistant, and scarce digital asset. Bitcoin provides a secure and transparent method of transferring value without the need for intermediaries, making it an attractive alternative to traditional financial systems that are often susceptible to corruption and censorship.

Scarcity: An Intrinsic Value of Bitcoin

The scarcity of Bitcoin is one of the key factors that contribute to its intrinsic value. Scarcity is desirable in an asset because it makes the asset more valuable and less prone to fluctuations in value. Scarcity also makes an asset more attractive as a store of value, as it is less likely to be subject to dilution over time. This is similar to the value of natural metals such as gold and silver, which have been used as stores of value for centuries due to their scarcity and durability. Original artwork is also valuable due to its scarcity, as there are a limited number of available pieces.

The argument that the scarcity of Bitcoin is not a valuable property is often based on the belief that monetary expansion is beneficial. This argument holds that money expansion helps to create economic growth in the short term. However, the expansion of money has been demonstrated to create greater problems in the long term such as over-borrowing, debasement of the currency, and recessions. This argument fails to consider the fact that the value of money is also dependent on its scarcity. If money were not scarce, it would lose its value as a store of wealth and medium of exchange.

It is illogical to regard gold, silver, and artwork as valuable on the basis of their scarcity but not to regard the same with Bitcoin. The value of these assets is dependent on the perception of their scarcity and their perceived benefits as a store of value or medium of exchange. Bitcoin, as a decentralized and scarce digital asset, provides these benefits and is therefore valuable in the same way as other assets that are valued for their scarcity.

Conclusion

In conclusion, the notion that Bitcoin has no intrinsic value due to its scarcity is a flawed argument. All assets, including Bitcoin, have intrinsic value derived from the perceived benefits they provide to their owners. The scarcity of Bitcoin, as a decentralized and scarce digital asset, makes it a valuable asset to those who value its unique properties. Those who deny the inherent scarcity value of Bitcoin are using this as a cover for other biases against the digital asset. By recognizing the intrinsic value of Bitcoin and its scarcity, we can better understand why it is a valuable asset and why it is illogical to say that Bitcoin has no intrinsic value.