Previously, we said even as crypto markets adopt more consumer protections, assessing their actual value remains critical. Maybe the best source for understanding what crypto was intended to be are the writings of bitcoin’s anonymous creator - the individual (or individuals) known by the pseudonym Satoshi Nakamoto. Satoshi’s bitcoin (BTC) vision was shared in a 2008 paper and further developed among a group of cryptographers across two years within 34 emails and more than 500 forum posts. Though most discussion threads focused on technical protocols of the blockchain, some centered on BTC value.
To the Moon
Thread members compared BTC to many things; ranging from stocks, metals, collectibles, and even beans. Some thought BTC value would reflect costs of production, implying prices rise with increasing electricity use by miners. One idea from Satoshi was that BTC use would drive value, and in turn, rising prices would attract more users; which may essentially describe a perpetual state of FOMO. Some likened BTC to shares of company stock. Others disagreed, including Satoshi, who said BTC is not like a stock and “more like a collectible or commodity”. Although Satoshi designed BTC to mimic gold, established commodities like gold have value from uses other than as a medium of exchange.
However, Satoshi’s comparison of BTC to collectibles may be one of the more valid descriptions. Collectibles have cultural significance and allow owners to express their individual views. In the same way, crypto ownership may express views on markets or monetary policy. One thread member said BTC value is "ideological" and may have aptly stated “bitcoins have value because they offer some qualities, and some people value them”. Another insight from Satoshi may have accurately described BTC value, as he said it may become “a self-fulfilling prophecy”.
Self-fulfilling prophecies have been defined as a false view causing a new behavior which makes the original false conception come true. Differing from self-motivation or self-confidence, those at the center of a self-fulfilling prophecy generally don’t understand that their beliefs caused the consequences they expected. While stock values are derived from projected company revenues, crypto assets have no such intrinsic value. The value of BTC depends on interest among potential owners; or perhaps, the level to which it is self-fulfilling. Though it’s safe to say companies will have varying levels of success, there may be no way to know if or when crypto interest will permanently wane along with its value.
June 15, 2022
The bitcoin whitepaper, along with the cryptography group emails and forum posts can be viewed at this link.
Aesop Advisor LLC views crypto as highly speculative assets and does not recommend them as investments. We recommend crypto purchases be treated as a casino bet using only an amount a buyer is willing to lose. Click to read our views on gambling versus investing.
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