Does Bitcoin have no intrinsic value?

Original Title: The Myth of Intrinsic Value

Original Author: Trey Sellers

Original Translation: Block unicorn

The price of Bitcoin has dropped about 25% from its historical high of $109,000, and critics have once again launched their full-scale attacks. Like clockwork.

A common criticism of Bitcoin is its lack of intrinsic value. This argument is often confidently and somewhat arrogantly proclaimed by Bitcoin skeptics, as if merely declaring it a fact can completely resolve the debate about Bitcoin's significance. They assert that without intrinsic value, Bitcoin is naturally worthless—discussion ends here!

Here’s a recent example:

Those "Dividend Bros" who criticize Bitcoin annoy me more than others because they would rather have less money for income.

In any case, I think it would be interesting to directly respond to this criticism, as it is also quite common in our community.

What is Intrinsic Value?

According to the Oxford Dictionary, the word "intrinsic" means "belonging naturally; essential." So the term "intrinsic value" must refer to the value of an asset being, to some extent, a part of its essential attributes.

Investopedia defines intrinsic value as:

"……a measure of the value of an asset derived from objective calculations or complex financial models, rather than using the asset's current market trading price."

This definition implies that a specific asset has some inherent value that can be objectively discovered in the real world, just like determining that water is composed of two parts hydrogen and one part oxygen. Similarly, the value of an asset is seen as an attribute of that asset—a kind of defining characteristic.

Further reading on Investopedia's page will immediately reveal a contradiction.

There is no unified standard for how to calculate the intrinsic value of a company or stock. Financial analysts attempt to measure the actual financial performance of an asset through fundamental and technical analysis to determine its intrinsic value.

Wait? Didn’t you say intrinsic value is "objective," but now you say "there is no unified standard"? What’s going on here?

One common method used by financial analysts and investors to determine an asset's intrinsic value is discounted cash flow (DCF) analysis. Essentially, they try to calculate the current value of an asset based on the cash flows it generates and the price they can buy it for in the market. While this method may be "effective" at a certain point in time, it is hard to say that any number you calculate is inherent to the asset you are evaluating.

The mere fact that the market trades the asset at different prices initially proves that DCF valuations are not inherent to the asset itself.

Some assets do not generate cash flows, yet the market still values them. Why is that?

Gold enthusiasts often loudly proclaim Bitcoin's lack of intrinsic value. Of course, gold is used in commodities like jewelry and electronics, while Bitcoin has no utility in the real world. However, the market value of gold far exceeds its industrial use value.

Real estate investors believe that the assets they favor have intrinsic value because they can serve as places to live or conduct business. People need a roof over their heads, right? However, the exact same house or building will sell for much more in New York City or by the beach than in some dead-end community in Oklahoma.

When people say "intrinsic value," what they really mean is "utility." Stocks are tied to businesses that generate cash flows, providing the utility of income streams. Gold provides the utility of wearing precious jewelry and achieving calculations. Real estate provides people with housing or vacation spots.

While all of this is true, everyone has different views on asset value and its utility.

All Value is Subjective

Everything exists in our minds.

The value of any object, service, or asset does not exist in the thing itself but is determined by individual perception, preference, and need. As Austrian economist Carl Menger said:

"Value is the judgment of the frugal person regarding the importance of the goods they possess for maintaining their life and well-being. Therefore, value does not exist outside of human consciousness."

Value does not exist in the physical or tangible attributes of an item—such as the gold in a coin or the silicon in a computer—but exists in the human mind. For example, to a person dying of thirst in the desert, a glass of water may be priceless, while for someone who can easily access clean water, it is almost worthless. The intrinsic properties of water itself have not changed, but its value varies greatly depending on context and personal need. Similarly, a painting by a famous artist may sell for millions at auction, not because of the cost of the canvas or paint, but because people perceive it as beautiful, historically significant, or a status symbol.

This does not mean that value is arbitrary or meaningless. It is closely related to human psychology, culture, and economic behavior. Individuals assign significance based on utility, scarcity, cultural meaning, or emotional attachment. This significance translates into our value judgments about specific things. Of course, this applies equally to gold, real estate, and stocks, just as it does to the desire for water when thirsty or the art in a gallery.

When we think about the value of financial assets, everything is speculative. Whether it’s stocks, real estate, gold, or Bitcoin, the value of each asset primarily comes from individuals' beliefs about its future value. This belief or perception of future value shapes today’s demand, driving prices up or down based on collective expectations. Since these expectations can change due to economic news, political events, technological innovations, and human psychology, the value of financial assets is inherently speculative and fluid.

Valuation of Bitcoin

I hope it is now clear:

• Nothing has "intrinsic value," at least not in the way most people use the term.

• Individuals assess assets differently and subjectively based on their views and priorities.

• Buying, selling, or holding any asset is speculation about the future.

The way Bitcoin is valued is the same as stocks, gold, and real estate. None of them have any inherent nature. People examine these assets and decide how much they are worth to themselves based on the utility and returns they expect to gain from owning them.

As time goes on, the utility provided by Bitcoin becomes clearer to more people, and they choose to buy and hold it.

• A fixed supply that cannot be altered by governments, banks, or other powerful interest groups means your share will not be devalued.

• Its digital nature and self-settlement capability mean it can be transferred anywhere in the world at relatively low cost at any time.

• Holding the private key to Bitcoin means you have unilateral, sovereign control over your wealth, with no counterparty risk.

Shifting the discussion to utility rather than intrinsic value immediately reveals the contradictions of those critics who rely on this argument against Bitcoin. If value depends on the utility an asset provides to individuals, and this utility is evident, then logically, Bitcoin has considerable value for many people. This is exactly what we see in the market.

Bitcoin's valuation in the market now reaches trillions of dollars, and this value will increase by trillions as more people personally discover its utility.

As people's understanding of what Bitcoin is, how it works, and the utility it brings continues to evolve, the price of Bitcoin will continue to fluctuate. But for Bitcoin or any other asset, this process has nothing "intrinsic" about it.