Article Author: Trey SellersArticle Compilation: Block unicorn

Bitcoin's price fell about 25% from its all-time high of $109,000, so critics are starting to strike with all their might again. Just like a clock.

A common criticism of Bitcoin is its lack of intrinsic value. This argument is often declared confidently and with a hint of arrogance by Bitcoin skeptics, as if the debate about the importance of Bitcoin can be completely resolved by just declaring it as if it is a fact. They assert that without intrinsic value, Bitcoin is naturally worthless - that's all about the discussion!

There is a recent example here:

The "Dividend Bros" who criticize Bitcoin are more annoyed than others because they would rather have a little less money for their income.

Anyway, I find it interesting to respond directly to this criticism, as it is also common in our community.

According to the Oxford Dictionary, the word "intrinsic" means "what belongs naturally and is essential." Therefore, the word "inner value" must mean that the value of an asset is to some extent part of its essential attributes.

Investopedia defines intrinsic value as:

"...measures the value of an asset derived from objective calculations or complex financial models, rather than using the current market transaction price of the asset."

This definition implies that a particular asset has some inherent value that can be objectively discovered in the real world, just as it is determined that water is composed of two parts of hydrogen and one part of oxygen. Similarly, the value of an asset is regarded as an attribute of the asset—something that defines.

Further read the Investopedia page and you will immediately find a contradiction.

How to calculateThere is no unified standard for calculating the intrinsic value of a company or stock. Financial analysts try to measure the actual financial performance of an asset through fundamental analysis and technical analysis to determine its intrinsic value.

Wait? Didn’t you say that intrinsic value is “objective”, but now you say “there is no unified standard”? What's going on?

A common method for determining the intrinsic value of an asset by financial analysts and investors is discounted cash flow (DCF) analysis. Basically, they try to calculate the current value of the asset based on the cash flow generated by the asset, and the price they can buy in the market. While this approach is "effective" at some point in time, it's hard to say that any number you calculate is inherent in the assets you evaluate.

The mere fact that the market trades the asset at different prices preliminarily proves that the valuation of the DCF is not inherent in the asset itself.

Some assets do not generate cash flow, but the market still values ​​them. Why?

Gold lovers often speak out about the lack of intrinsic value of Bitcoin. Of course, gold is used in commodities such as jewelry and electronics, and Bitcoin is completely useless in the real world. However, gold has a market value far exceeding its industrial use.

Real estate investors see the assets they favor have intrinsic value because they can serve as a residence or a place to conduct business. People need a roof that shelters from the wind and rain, right? However, the exact same house or building will sell for a lot more than a neighborhood in a dead end in Oklahoma.

When people say "inner value", they really mean "utility". Stocks are linked to the business that generates cash flow, providing the utility of revenue streams. Gold provides the utility of wearing precious jewelry and implementing calculations. Real estate provides people with a place to live, or take a vacation.

While these are true, everyone has different views on the value of assets and their utility.

Everything is in our minds.

The value of any object, service or asset does not exist in the thing itself, but is the perception of the individual,Determined by preferences and needs. As Austrian economist Carl Menger said: "Value is the judgment of the importance of the goods they own for maintaining their lives and well-being. Therefore, value does not exist outside of human consciousness." Value does not exist in the physical or tangible properties of an object—such as gold in a gold coin or silicon in a computer—but in the heart of a person. For example, a glass of water may be priceless for someone who dies of thirst in the desert, but is almost worthless for someone who can easily get clean water. The inherent properties of water itself have not changed, but its value has changed dramatically due to situations and personal needs. Similarly, a painting by a famous artist may be sold for millions of dollars at auction, not because of the cost of canvas or pigments, but because it is considered beautiful, historical, or a status symbol.

This does not mean that the value is arbitrary or meaningless. It is closely related to human psychological, cultural and economic behavior. Individuals give importance according to utility, scarcity, cultural significance, or emotional dependence. This importance translates into our value judgments about specific things. Of course, the same applies to gold, real estate and stocks, just like the thirst for water or the artwork in a gallery.

When we think about the value of financial assets, everything is speculative. Whether it is stocks, real estate, gold or Bitcoin, the value of each asset mainly comes from the individual's belief in its future value. This belief or perception of future value shapes today’s demand, driving prices up or down according to collective expectations. As these expectations change due to economic news, events, technological innovation and human psychology, the value of financial assets is inherently speculative and liquid.

I hope it is clear at this time:

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

Individuals conduct different and subjective assessments of assets based on their own opinions and priorities.

Purchase, sell or hold any asset is a speculation about the future.

Bitcoin is valued in the same way as stocks, gold and real estate. None of them have anyInnerity. People look at these assets and decide how much they are worth to themselves based on the utility and returns they expect from owning them.

Over time, the utility provided by Bitcoin has become clearer to more and more people who choose to buy and hold it.

Absolutely fixed supply cannot be changed by , banks or other powerful interest groups, which means that your share will not be depreciated.

Its digital nature and self-clearing power mean it can be transferred to anywhere in the world at any time at a relatively low cost.

Holding the private key of Bitcoin means that you have unilateral, sovereign control over wealth and there is no counterparty risk.

Turning discussions toward utility rather than intrinsic value immediately reveals the contradictions of critics who rely on this argument against Bitcoin. If the value depends on the utility provided by the asset to the individual, and this utility is obvious, then logically, Bitcoin has considerable value to many people. This is exactly what we are seeing in the market.

Bitcoin is now valued at trillions of dollars in the market, 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 change, Bitcoin's price will continue to fluctuate. But for Bitcoin or any other asset, there is nothing "inner" about this process.