Thousands of words have been written on the subject, and many more will be written in the future. Unfortunately, very few of them will help us to answer that simple question. In any case, we already know the answer, and it has nothing to do with Bitcoin itself, but rather with the way in which we consider things valuable. Let me explain…

The concept of “value” is defined, in theory, as “the regard that something is held to deserve; the importance, worth, or usefulness of something.”  This definition would seem, on a first glance, to contain all what we need to know about value, except that this definition is incomplete when we talk about some specific objects or financial constructs.

In financial instruments of any kind –and Bitcoin could be considered one of those- value is increased by scarcity, desirability and an inability to duplicate whatever makes said instrument valuable. The equation that results in the value assigned to a given thing is more complex than it would seem, and it includes concepts related to physical limitations that prevent the duplication of the object, and the ability of this object to connect with our emotional nature as human beings.

As we intuitively already know, nothing has intrinsic value in itself: for a teenage girl, the posters of a pop star that cover the walls of her room are highly valuable. These posters, however, are completely devoid of value to her parents, which in turn have assigned much value to a number of bricks, a few kilograms of concrete and a few litres of paint arranged in a specific manner. They call this a house. They value this house so much that they are willing to spend most of their present and future income in it. Rare stamps that are incredibly valuable to a certain group of collectors have no value whatsoever for the majority of the general public, that would not think twice about throwing them away.

With Bitcoin, like with stamps, houses or celebrity posters, something similar happens: the true value of Bitcoin –and of anything else for that matter- is simply what someone thinks that a Bitcoin is worth, at any given time.

So on to the next question: is Bitcoin “overvalued”?

A potential overvaluation of Bitcoin is hard to measure, for two reasons: firstly, a true objective and neutral reference point to value things does not exist; secondly, because as long as humans are the ones assigning that mythical “value” to things, nothing can be valued in an objective manner.

When I founded BitcoinGlobalInvestments.com, this was –and still is- precisely one of our objectives: to get to know everything there is to know about Bitcoin, and reach a perfect understanding of the relationship between events, price, news, public perception and other factors influencing Bitcoin.

Somehow, I feel that those that talk about Bitcoin being “a bubble”, or simply being overvalued, are not spending as much time on these issues as we do, and consequently, their assessments of “overvaluation” may well be completely wrong. After all, if we were to take decisions based on the  opinion of “experts” and the media –both of whom failed to see the Lehman Brother collapse coming, let’s not forget-  we would not only get late to every single investment opportunity, but would also fail to see the potential –and real- risks of all types of scams.

In any case, when the “experts” and the press tell us that Bitcoin is overvalued… we should ask, “Compared to what”? For example, is Bitcoin overvalued against a gold market that has shown suspicious volatility and a clear downward inertia in the last few years? Or against a record-breaking stock market that is totally disconnected from the most basic of economic principles? Is Bitcoin overvalued against the valuation of a particular social media website? Or perhaps against the “real value” those financial institutions receiving billions of dollars from governments around the world, provide to society? Is Bitcoin overvalued against the “value” that a Francis Bacon painting provides to its viewers, willing to pay up to a hundred and forty two million dollars for it?

The more we think about value, the more we see that nothing in particular contains intrinsic value by itself. In fact, the mere concept of intrinsic value is a myth. Everything is valuable in function of everything else, including its utility, and the psychological hold that the object has in the imagination of the general public.

In regards to Bitcoin, many seem to think the emotional value associated to it, plays a big role in its valuation. This may be partially true to the extent that a hype cycle will always fuel speculative manias. However, this fact has to do more with human psychology than with the Bitcoin protocol itself, and its inherent strengths and weaknesses.

So how can we value Bitcoin effectively?

In order to asses Bitcoin’s value effectively, we must pay attention to the positive underlying characteristics of the currency. Some of these include Bitcoin being a store of value against inflation. Is this something “real”? The answer is a definite yes. It is as real as our perception that Gold or other precious metals are valuable. Humans have chosen to give value to different things over time, and Bitcoin is one of those today. This already creates “intrinsic value” in it, due to its scarcity and desirability. But this currency-protocol-commodity is much more than that, for Bitcoin is a perfect vehicle to send money thousands of miles around the world, in a few minutes, for cents on the dollar. This gives value based on its utility.

Apart from this, Bitcoin is, today, a transparent and sophisticated decentralized networking system with the approval, support and active participation of thousands of the smartest minds in the world. This systems works in a democratic manner, for it is controlled by all Bitcoin users around the world. While developers improve the software, they cant force unilateral changes in the Bitcoin protocol, relying instead on the consensus among its key users, producers and developers.

This democratic, decentralized nature of Bitcoin, which implies very few points of weakness in the system, provides value in the form of potential future stability both as a currency, and as a commodity.

Bitcoin is also an international, electronic platform with little-known but powerful applications including escrow mechanisms, share and contract-trading, and many more. Bitcoin also happens to be the frontrunner and best-known of all virtual currencies, gaining every day more popularity as a new way to purchase goods and services, send money abroad, or store value. As of today, Bitcoin has become THE de facto cryptocurrency, and in the marketing world, the kind of exposure that comes with that first-mover advantage Bitcoin has enjoyed so far, has in itself a considerable amount of “value”.

Since Bitcoins have frequently been compared to tulips during the tulip-mania, could we have said about tulips, the same things we say about Bitcoin?  Did tulips provide some “intrinsic” utility to society, as Bitcoin does, or were they traded solely on the aesthetic and psychological value that we assigned to them?

The answer to that question leads us to the realization of Bitcoin’s enormous potential, for one of this cryptocurrency’s  greatest strengths is its utility. No opinion piece, article or report about the “value of Bitcoin” will be complete without a clear and accurate assessment of the importance of the “utility factor” to the general public. Unfortunately, this kind of assessment is as hard to find today as a needle on a haystack. The reason: as of today, most journalists and “experts” don’t fully understand Bitcoin –let alone its future ramifications. Unfortunately, some never will, and their inability to inform us properly takes us to the next question: does the current, or potential future high valuation of Bitcoin –the price of a Bitcoin today- reflect the “true” long-term value of the Bitcoin system based on its utility? Probably not. Once again, this is not Bitcoin’s “fault”, but the natural result of our human nature at work -what Charles Mackay called “Popular delusions and the madness of crowds”.

So where is the truth about Bitcoin?

In light of our reasoning exercise and logical deductions, the argument that Bitcoin is just one of these popular delusions of the times, can be put to rest, for it is clearly mistaken.

In the coming days and months, many speculators will lose money speculating on the price and “value” of Bitcoin. This will be their own fault, for after all, if we leave matches lying around, and a child gets burnt playing with them, will we blame the matches? Will we blame fire itself? Will we try to stop its use?

As we go forward in time, Bitcoin’s value is will fluctuate in ways that are hard to predict with precision, even for true Bitcoin specialists like those in the group I lead. We know that there will up and downs along the way, and minor and major “crashes” or corrections.

This is the natural course of events when humans interact with any kind of system in which they can assign subjective value to things, and this is not a problem in itself. However, the risk exists of oversimplifying things to the point of seeing problems in the system, which actually are problems of the actors interacting with it.

Bitcoin as a protocol, network, currency and idea is much more than its temporary price on a specific day and on a certain exchange. Bitcoin is a powerful way to create, perfect or streamline systems and processes in ways that are -and will be shown to be- extremely useful to humans…and that’s the main “value” of Bitcoin.

Anyone that does not see this value, is either misinformed, has an ulterior agenda, or is plainly wrong.

When a person buys a Bitcoin, they’re casting a vote; they are, in effect, investing in the power of the idea of convenient, easily transferrable and “democratic” digital cash. The time of that idea has come, whether skeptics understand Bitcoin true potential, or they don’t. The time of that idea has come regardless of the hype around this currency, or of the panicky approach shown by misinformed or confused “experts”, journalists and bloggers.

The value of Bitcoin is not in its unit price today, and should not be found there. The value of Bitcoin lies in its power to change our paradigm once and for all and bring our old, tired and corrupt economic system into a new, digital era.

Intrinsic value indeed.

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Javier Marti is the founder and CEO of BitcoinGlobalInvestments.com

For more information visit JavierMarti.co.uk