1/ Every day, a professional investor asks me how bitcoin can have value when it doesn't produce cash flows. Here is what I say...
2/ Bitcoin offers a service: The ability to store wealth securely in a digital format without relying on a bank, company, or a government.
3/ You can think of this like any other service. For instance, Salesforce provides a service: The ability to track customer relationships and sales activities in a database.
4/ The difference is, you pay a fee to Salesforce -- a company -- to access its service. Bitcoin is not a company, so there is no one to pay a fee to. The only way to access the service bitcoin offers is to buy bitcoin. If you do that, you get the service.
5/ With this framing, valuation questions drop away. If more people want Salesforce's service, the value of Salesforce goes up; if fewer people want its service, the value of Salesforce goes down; and if zero people want its service, the value of Salesforce is zero.
6/ The same thing is true of Bitcoin: If more people want Bitcoin's service, the value of Bitcoin goes up; if fewer people want its service, the value of Bitcoin goes down; if zero people want its service, the value of Bitcoin goes to zero.
7/ Fortunately, the number of people who want bitcoin's service is rising quickly. As a result, BTC is up ~9,700% in the past 10 years, and imo heading higher.
8/ The mechanism by which value accrues is different, and it has to be. After all, the core service Bitcoin offers is that you do not have to rely on any centralized entity to store your wealth. By definition, that means there is no centralized entity that can collect fees.
9/ But the end result is the same: More demand, more value; less demand, less value; no demand, no value. It's really not that different after all.
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