Does Bitcoin Have Inherent Net Worth?

 

Dear Reader,

I have read many leading investors and portfolio managers, especially high-ranking employees of large asset managers, say that Bitcoin does not have inherent worth. Or with other words that Bitcoin is worth nothing.

Does Tesla or other hugely loss making technology companies, now valued at many billions USD, have inherent net worth, then? When investors basically hope these companies will one day become profitable.

Apparently, the aforementioned portfolio managers base their claim that Bitcoin does not have inherent net worth on standard finance theory which says that an asset's value is equal to the future cash flows the asset, government bond or company will produce in the future, discounted back to the present day. That said, have Facebook, Tesla or Amazon paid out any dividends? Amazon is listed on the Nasdaq bourse since 1997, that is for 24 years, and Amazon has not paid a single US cent in dividends. So the future cash flows are expected when? In the next 24 years?

Bitcoin, actually serves as the infrastructure for all the other cryptocurrencies. Many companies minted newly created cryptocurrencies to finance their businesses. Bitcoin is decentralized, that is no one actually owns the whole thing, so its is difficult to say to whom future dividends will flow to. Bitcoin could actually pay out dividends if its ownership structure is figured out.

Bitcoin is now widely considered money. Do the United States Dollar, the Euro, the British Pound or the Japanese Yen pay out dividends? No. But they are worth a lot. I read an article by the head of one of the leading asset managers in the world that the United States Dollar, the Euro, the British Pound or the Japanese Yen have value because they are backed by the flow of money from taxes their respective governments collect, the militaries of the respective countries and the organization of the USA, the European Union, Great Britain or Japan as large and influential countries or unions in the European Union's case.

And? When you have a military behind you, you are worth something? Or are you? Does the fact that because Bitcoin's distributed blockchain is owned by the people mean it is not worth anything? The military is there to serve the people, right?

Bitcoin actually provides huge cost efficiencies for many businesses which are yet to be realized in the future. Business are created to make profit. That happens when revenue is above costs. And with the distributed blockchain businesses can save on costs a lot and thus increase their profits. Bitcoin is well on the way of becoming a legitimate store of value, unit of account and means of exchange or with other words money. Governments, however, still have not figured a way to control Bitcoin and other cryptocurrencies, though. Which is not necessarily a bad thing.

What are cryptocurrencies actually? They give the freedom for every company to issue its own currency. Commercial banks, in fact, have been issuing their own currencies since centuries. Commercial banks' own currencies are just called monetary reserves creation or reserves multiplicator and they are just cloaked in the official currencies like the USD or EUR, where the banks do business.

Yes, I am a libertarian and Bitcoin and other cryptocurrencies are another libertarian dream. However, Bitcoin and the distributed ledger provide many benefits, which if used widely, could move the world forward. A lot.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich