Gu Yanxi: What is the market value of Bitcoin based on? How is it different from the Internet bubble?
Bitcoin’s $440 billion market value has now surpassed Visa’s U.S. dollar market value, and it far exceeds Chase Morgan’s $380 billion market value. Bitcoin is more comparable to Visa than these two companies. Visa’s service is a global clearing network for credit card transactions, and it only focuses on this business. Chase Morgan is a company that provides full banking services. And most importantly, it is the largest commercial bank in the United States.
Now the market value of Bitcoin has surpassed the market value of the nation’s largest commercial bank, and it has also surpassed the market value of online companies that provide global credit card clearing services. This shows that the market has formed a consensus on the value of Bitcoin on a global scale.
In other words, the market already believes that the value of Bitcoin is greater than the value of these two companies. What needs to be pointed out here is that if only ordinary retail investors around the world reach a consensus on the value of Bitcoin, it will be difficult to push the market value of Bitcoin to the current height. Bitcoin can reach its current market value because institutional funds have begun to enter Bitcoin. The recent large-scale purchase of Bitcoin by institutions in the US market is a proof of this.
A common view that still exists in the market is that the value of Bitcoin is the result of market speculation, and that the value caused by such speculation will not last. This view usually compares the value of Bitcoin with similar bubbles in history, such as the recent Internet bubble. But Bitcoin’s current value consensus is fundamentally different from the value consensus of the Internet era.
Bitcoin’s valuation is essentially different from traditional valuations
The valuation in the Internet era is still based on the traditional valuation method, which is to judge the company’s current value based on the company’s future expected profits. If the company’s revenue and profit development does not meet market expectations, then the company’s valuation will definitely fall quickly. The bursting of the value bubble in the Internet era was because Internet companies did not achieve the rapid growth in profits that people expected. But the basis of Bitcoin’s value is completely different.
The value of Bitcoin is not at all dependent on the underlying ownership or expected benefits. The characteristic of Bitcoin value is that it is its value. The size of this value is completely judged by the market, and it is completely subjective judgment of people. So the value of Bitcoin will never be falsified. In this respect, it is very similar to religious belief. When more and more individuals and institutional users believe that Bitcoin is valuable, then Bitcoin is valuable. And when the market begins to think that Bitcoin has no value, its market value will naturally go down. There are many indirect factors that affect the market value of Bitcoin, but in the end it is the result of people’s subjective judgment. Therefore, its market value is likely to surpass companies like Visa and Chase Morgan, and it is also possible that it is just a value consensus reached by a minority group. In this respect, it is the same as the value consensus basis of collections such as artworks and monkey tickets.
The market value of Bitcoin based on consensus may not be able to last long
A corollary related to the bubble theory is that the value of Bitcoin cannot be sustained. But such a judgment may not be correct. As mentioned earlier, the market value of Bitcoin is the result of subjective judgment or belief. And religion based on faith has always existed in human history. The history of religion is much longer than that of modern trading products. From another perspective, since the value of Bitcoin cannot be falsified, this feature also contributes to the long-term existence and growth of its value.
If we compare Bitcoin with religion. We can see that there are very similarities between the two. First, neither can be falsified. Second, there needs to be a group of strong believers. Third, believers gather regularly to maintain this faith together. Fourth, regular and continuous activities to maintain this belief. Fifth, believers make continuous contributions to the faith, including funds, activities and time. If we look at the Bitcoin-related activities from the above points, then we can conclude that the value of Bitcoin as a belief can continue to be maintained like religion.
Is there a solid foundation for Bitcoin value belief?
The legal currency has the future tax of the legal currency issuer as its value basis. Gold has potential payment functions, and its scarcity is the basis of its value. So is Bitcoin entirely based on faith and has no use value? the answer is negative.
The direct use function of Bitcoin is a value store and value transfer tool. Due to its limited number, free circulation, convenient use, and huge liquidity, Bitcoin is now being used as a value store and transfer tool. So in any area where the value of the legal currency is depreciated and the economy is turbulent, Bitcoin will be welcomed by the market. In this respect, it has the same effect as some digital currencies. But compared to digital currency, Bitcoin has its unique characteristics, so it will be welcomed by the market. If we look at the current currency devaluation regions, such as Venezuela, Lebanon and Argentina, etc., we will see that the price of Bitcoin in the local area is rising rapidly. Of course, it is still in economically developed regions that the global price of Bitcoin can ultimately be achieved, although there is no direct market demand in these regions to use Bitcoin as a value store and transfer tool. However, it is clear that the market is not very optimistic about the current currency generation and circulation mechanism, which is why Bitcoin is potentially used as a value storage and transfer tool, which has led to the continuous rise of Bitcoin prices.
