Thread by @FinFloww

How to value Bitcoin? A thread🧵

A lot of people ask about the intrinsic value of Bitcoin,
and try to value it just like they value stocks. Let's try to
understand this better.

Any stock's price increases because investors see it's
value increase (here value means earnings of the
company by selling something, reinvesting capital and
growing it's business and generating more money)...

For an asset, the price increases because more
people adopt that asset as a storage of value.

A stock's price increases because more a
people understand it's value is increasing, and adopt it
as a good storage to their value.

Same with Gold. People adopt it as an asset, and when more number of people adopt, it's value increases. When that happens it's price also goes up.

Anything that holds value may or may not produce cash-
flow. Doesn't mean it's not an asset.

Take Gold for example again. You buy it store it. It's not
a company selling something, generating return and
reinvesting it into the business, still it has value.

Why does Gold have value?

Gold is a storage unit. A unit to store value. Why was
it adopted as such an asset? Because it's a rare metal,
it is supposed to be finite, it's lustrous and beautiful,
but most importantly....

gold has value because everyone in this world has
adopted and accepted gold as the store of value.

Mass adoption and mass trust has value. Every asset we
own, either it's a sneaker or it's a painting or it's gold or
silver has value because we give it value.

In this world something has value if either it's limited in
supply or it is being adopted for some utlity.

There are only a limited amount of bitcoins that can be
mined.

Now comes the important part. How is Bitcoin valued?

To value such an asset, you need to understand it’s adoption. If less percentage of people are owning bitcoin and don’t store much of the value they generate in it, it will remain undervalued.

Once it’s adoption becomes fairly high, it’s going to be fairly valued.

And no it’s not like Doge, it’s not emotional or human acceptance of Bitcoin as our natural currency that makes it valuable. It’s the adoption of it as an asset.

Let's also talk about Bitcoin's utility.

What gives the company like Whatsapp value, or something like Facebook value? Network effect.

Because there are more number of people using these services, they have more value. And value can be of two types. Utility or scarcity.

Bitcoin's network and technology adoption is something which increases it's underlying value.

If more number of people adopt it's network, it's value would increase. Which would make the price go up.

So, 2 things which would increase Bitcoin's value: scarcity, utility and adoption. That is Bitcoin's intrinsic value.

Now you do your own research, study about Bitcoin, read about it's technology and how it can be adopted further, and then make an informed choice.

Also read this book "The Internet of Money" by Andreas M. Antonopoulos.

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