Less than 12 hours have passed since Bitcoin dropped by about 10%, and it's again at an all time high, up about 15% from it's 10% dip. This proves once again that Bitcoin has no utility as money. In fact, it has no utility at all except as a lottery ticket.
This illustrates that price does not have to be backed up by utility. The value of Bitcoin is not its utility, but its promise of easy riches. People buy Bitcoin with the idea of selling it in the future for a higher price. Any other claim is either due to ignorance or delusion. Bitcoin is not money. This has been known since mid 2017. Bitcoin is not a store of value. This has been fully demonstrated over the last 24 hours. Bitcoin's only value is its volatility, making it suitable for gambling. But volatility and storage are in turn opposites. A store of value has to be stable. Anything volatile cannot at the same time be a store of value. At best, it may be more stable than paper currencies some time in the future, but this is highly doubtful. Empirical evidence indicate that Bitcoin is becoming increasingly volatile over time.
All of this illustrates in turn the distinction between utility and value. Utility is not required for something to have value. If we define utility to be real world applications outside gambling and finance, Bitcoin has no utility. In contrast, gold has utility as raw material for jewellery and various other applications. The price of gold cannot go to zero because of real world demand due to its utility. Bitcoin, on the other hand, has no utility, and can therefore go to zero.
It is this type of utility that is sometimes called intrinsic value. Other things with intrinsic value are capital goods, real-estate and shares in companies that produce goods and services of utility. A company fully invested in financial assets of no utility is itself of no utility. A company producing cars, on the other hand has at least some utility, and therefore a price that can be derived in a rational way.
Conversely, things of no utility have no other value than whatever people may think they have. The price cannot be rationally calculated. There's no way of saying where the price of Bitcoin may be at some future point, because there's no utility from which we can base our calculations. The price of Bitcoin is in its entirety derived from perception, and perception is extremely volatile.
This in turn, illustrates the distinction between investing and gambling. Putting money into something of little to no utility in the hope that it will fetch a higher price in the future is gambling. Putting money into things of utility is investing, unless directly consumed. If the price can be demonstrated to be low, the investment can be termed prudent.
For something to be an investment, it must not be directly consumed, and it cannot be without utility. There has to be the prospect of consumption over time or in the future. Buying a house to live in is therefore both consumption and an investment, and buying a house to rent out is a pure investment. Buying a house simply to sell it later is also an investment, but a speculative one, especially if there's credit involved. Beautiful furniture is also an investment. If used and enjoyed in the present, it doubles as consumption. If bought solely for the purpose of selling it later it's more speculative, but still an investment. Only things of no utility are purely speculative. Such things are not in any way an investment. They are gambling tokens with all their value derived purely from sentiment.
Brass token currently priced at about $35,000
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