Debate sparked by Charlie Lee revealed Bitcoin has no Intrinsic Value from Mining

There is currently a blockchain cruise going on that is organized by Coinsbank. It already sparked a lot of discussions and one of the most interesting ones from yesterday was sparked by Charlie Lee. He claimed that Bitcoin has an intrinsic value because the production costs are $4758 USD.

However, Lee’s claim was refuted fastly by Derek Magill, a founder and CEO in the crypto space who also founded
the project Nakamoto studies. He called Lee indirectly an adherer of the labor theory of value, a popular economic theory of the 18th century that is still discussed today. He refuted Lee by saying that by applying this logic “a big hole dug in the street has value because it costs money to dig”.

The labor theory cannot explain the value of Bitcoin

The labor theory of value cannot explain or describe the price or even the value of Bitcoin correctly. It is possible that the price of one Bitcoin sinks lower and lower and even below the mining costs. Lowering prices would mean that more and more people would stop mining Bitcoin. Which poses a threat to Bitcoin as the decrease in hash power would mean that fewer transactions could get verified. But of course, the difficulty can be lowered to attract more miners once again. This example proves not only that the Bitcoin price can fluctuate freely. But also that the mining costs adjust to the price of Bitcoin and not the other way round. So what does determine the Bitcoin price instead?

Subjective value in Bitcoin

If you would have a definitive answer to this question you could get rich easily. The pricing in Bitcoin just as in any other asset is a complex process. But it happens every day at any time and we can describe what is going on there. Every day at any crypto exchange there are people that want to buy and sell Bitcoin at different prices. You might have bought Bitcoin back in 2011 and would accept every price above $5000 USD. Or you live in Venezuela where the Bolivar is losing its value by the hour so you would even pay a bit more for Bitcoin to buy food because people prefer BTC over the national currency right now.

A million people will have a million of reasons to price Bitcoin whether they think Bitcoin is correctly valued or over/undervalued. So the only conclusion that we can make is that the pricing of Bitcoin is subjectively and even more so the valuation of it.

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