1/ Lots of renewed focus on cryptoasset valuation lately. Not to throw a wrench into the works, but I think "peace of mind" drives most of the value...
2/ Without getting into the MV=PQ fight, it should be clear that if people *want* to hold an asset while not explicitly using it, that asset's marketcap needs to be higher to meet demand than an asset people ditch immediately.
3/ This can mean orders of magnitude in difference! eg, if an asset can be frictionlessly bought in a dex-integrated wallet a millisecond before use, and sold right after, vs something people hang onto for years.
4/ This is the whole ballgame in cryptoasset valuation: holding preference. So why might people *want* to hold an asset longer than they strictly need to in order to use it?
5/ Here are a few reasons for higher holding preference...and they may not be strictly economically rational!
6/ -- A) For future utility. ie, they imagine needing to use the asset again in the future, and it's easiest - or even just laziest - to simply hang on to it.
7) -- B) They may consider the asset a collectible. This is not narrowly economically rational! But it is a very human thing to do.
8) -- C) Holding the asset may give the person "peace of mind". They may literally be happier holding it versus not holding it.
9) Naturally the perceived or real monetary security of holding an asset no one can seize, or censor your use of, can yield tremendous peace of mind.
10) And this peace of mind can make someone want to hold an asset for literally *millions* of times longer than they may strictly need to for direct use.
11) To use Bitcoin as a payment means, you need to tie it up for maybe an hour. To use it to hedge against the IMF's forced bail-in playbook, you need to hold it for *decades*.
12) You might not be the type of person who feels this way and worries about these things, but the tremendously increased holding preference of people who do is driving the lion's share of the value.
13) Don't fight the thing people feel happiest doing. Most academic economists look at gold bugs as irrational preppers. Maybe so, but they are scratching an emotional itch to the tune of $7T (gold's marketcap).
14) That dwarfs the entire cryptoasset ecosystem today by 25x, and Bitcoin leads the pack on its safety/security/certainty/uncensorability grounds which give its holders peace of mind.
15) This is tightly related to @QWQiao's thread on the necessary conditions for store-of-value. Check it out if you haven't:
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