I make no secret of the fact that every Friday morning I buy Bitcoin. I’ve been doing this for years, and have no plans to stop. All too often we read on Social Media — or even here on Medium — the claim “Bitcoin has no intrinsic value”. Sometimes they’ll try to level up, claiming “Bitcoin is intangible and has no value.”
These are rubbish arguments propagated by people who don’t understand either economics or banking. Let’s deal with each falsehood separately.
FIRST INTRINSIC VALUE
The simple fact is Bitcoin does have intrinsic value — the cost of mining. And this is consistent with other commodities such as gold or silver, the intrinsic value of Bitcoin is its production cost. So how much does it cost to mine one Bitcoin? This is likely different than market value — hopefully lower — but does, in fact, represent Bitcoin’s intrinsic value.
What happens if the market price of Bitcoin is higher than production cost? The profits on offer will induce others to mine.
What happens if the market price of Bitcoin is lower than production cost? Losses will drive some miners to turn off their rigs, perhaps leaving the business if the don’t have working capital.
This is indisputable; it is basic economics.
