[Bithumb Easyconomy] Time to See Bitcoin Value from A New Perspective

“Digital assets can be troublesome for the market itself is overheated compared to their substantial value. Therefore, we believe we should take caution in making investments.”

At the interpellation session on comprehensive policies at the Special Committee on Budget and Accounts held by the National Assembly of Korea a few days ago, Hong Nam-Ki, Deputy Prime Minister and Minister of Economy and Finance, who is in charge of the Korean economic policies, answered like this for the question from a member of the ruling party. It was a question asking about his opinion about the digital asset market that is soaring high recently. No matter which assets are bubbles or not, the skyrocketing of the price in a short period means that there will be a certain amount of risk. And that is why the economic bureaucrats remain cautious and conservative.

However, whether digital assets including Bitcoin have intrinsic value or not is a totally different matter. A few days before Mr. Hong, the Deputy Prime Minister, made his remarks, Lee Ju-Yeol, Governor of the Bank of Korea, pointed out that “Bitcoin has no intrinsic value from its beginning.” He said, “(Personally,) It is hard to understand why Bitcoin’s price has gone so far.” He also added a warning by saying, “Bitcoin has no intrinsic value, and that is why Bitcoin is showing high price volatility.”

While digital asset’s upward rally is still ongoing and the price of Bitcoin has surpassed USD 60,000, the dispute over their intrinsic value is still raging on. For whether to invest in a specific asset or not is decided by comparing the intrinsic value of the asset and its market value and evaluate which is bigger.

What we should take into consideration is that we need to see the several different features of digital assets, too. As for Bitcoin, it has both features in itself; a feature as an “asset”, a method of storing value, and a feature as a “currency”, a method of value exchange. We can say the same about Ethereum. While having the feature as an asset, Ethereum also partially possesses the feature as a currency or a platform in its financing or decentralized finance (DeFi) field. That is to say, judging that digital assets have no intrinsic value by emphasizing only one part of their feature is far too unilateral.

Some say that digital assets, including Bitcoin, will lose their ground for the central banks in several countries, starting from China, are issuing or preparing to issue their own digital currencies (CBDC; central bank digital currency). However, the amount of CBDCs independently issued by national central banks is also very limited in scale. Since it is difficult to forecast how the money supply will move and which currency policy they shall take accordingly, not a single bank is even dreaming to issue all their legal tenders in CBDC. Besides, even if the amount of CBDCs is going to increase, the payment methods in the private sector have always coexisted with legal tenders, which means there is no need to worry about it.

The same goes for if we consider Bitcoin as an asset We usually call Bitcoin “digital gold” and comparing it with gold as a real asset. Gold can be processed to make various jewels, and it can also be used as a material for smartphones and other electronic products due to its conductivity. On the contrary, people are saying bitcoin has no such value. However, the intrinsic value of something does not depend merely on such physical properties. The intrinsic value of Bitcoin comes from its scarcity. It is a new concept of intrinsic value: everyone can check the validity of distributed ledgers easily. In other words, that means thousands or millions of nodes can keep the integrity in check all the time.

Metaverse, one of the latest, hottest issues, is a neologism formed by combining the word “meta” which means imaginary or abstraction, and the word “universe” the real world. It is a concept more advanced than simple virtual reality and it describes a form of the world where the virtual world on websites, the internet, or networks being combined and integrated into the real world. We can say, the intrinsic value of Bitcoin does include the value in such metaverse.

Taking digital assets with platform-like features such as Ethereum into account, their value will only grow even more. As a blockchain-based platform, Ethereum, which had been categorized as a consumable token, has the advantage of providing various services within the boundary of the network. Cloud-based Amazon web services which have the largest value in the world and Baedal Minjok, a food delivery app that connects orders with drivers or couriers, show the value of such a platform.

The standards of value have always changed as time goes by. The intrinsic value of digital assets, including Bitcoin, and the investment value beyond are ever requiring new standards. We look forward to seeing the “re-rating” of Bitcoin.

*This research and analysis document has been prepared for the purpose of providing information that can be used as a reference based on our reliable data and information, but we cannot guarantee its accuracy or completeness.

*The document has reflected the individual’s opinion, and it may not be consistent with the company’s official point of view.