Is Bitcoin an asset?

 

My answer is “yes” and “no”. At the most fundamental, Bitcoin is a means of meeting financial obligations – it can be used to pay for things and is recognized as currency. It has been likened to gold, as a storer of value, but here Bitcoin looks less like an asset as it has no intrinsic worth , it has more in common with fiat currencies in that it is not backed by anything tangible and owes its credibility entirely to the supposedly immutable block-chain.

Except that the block-chain is not as immutable as it should be, because hackers have a habit of corrupting its perfect Statius.

In a recent Forbes article , Billy Bamborough reports speculation that the price of a Britcoin could double in 2021. The article quotes Nigel Green (who has reported himself busy profit-taking from Bitcoin investment) telling us Bitcoin has been the best performing “asset” of 2020. The 250% increase in Bitcoin’s price has clearly not been based on improvements in economic value, rather it appears that Britcoin transfers wealth to speculators who have little interest in what money does.

I suspect that there are several historical precedents for such speculation and the bubble that the speculation creates has much to do with investment in  the economic value of “assets”

In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything that can be utilized to produce value and that is held by an economic entity and that could produce positive economic value. Wikipedia

Which is why I can’t quite bring myself to think of Bitcoin as an asset. There is a case to be made for Bitcoin as producing positive economic value and I’m ready to hear it. But right now I am not hearing it and frankly the world needs its money to be doing good not bad things.

So my challenge to those people commenting on this and other blogs in this series, is show me the E , S and  G of bitcoin- for that argument is one that could get me thinking of why I’d want to hold the currency, rather than speculate on its short term price increases.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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8 Responses to Is Bitcoin an asset?

  1. Peter Telford says:

    The ESG of Bitcoin is massively negative. Mining Bitcoin is a competition that wastes electrical energy on an industrial and escalating scale. I can see no moral defence for engaging with Bitcoin.

  2. DaveC says:

    Energy can’t be created or destroyed, so it’s purpose to ‘back’ the value of bitcoin is logical as there is no way to ‘print’ more energy.
    Other methods of proving creation of it could be more easily subverted.
    Any method that allows it to be more easily created would likely benefit all of humanity (free clean energy, or massive leaps in computing power)
    Arguably energy is abundant, the top 10km of the earths crust heat alone has enough energy to last humanity millenia at current rates of usage.
    I think humans need to focus on their energy production ethics and policies rather than demonising usage.
    How many people here fly on heavily polluting aircraft just to go get some sun?

    I’d like to understand the current co2 or energy footprint of fiat currency in both electronic and material forms before condemning bitcoin on that facet.
    Printing new bank notes in plastic every 10 years for example; the running of IT systems the world over. These can’t be zero cost.

    Does anyone here even know how bitcoin works?

    It’s been turned into a pyramid scheme by some, just like tulips were by others.
    It’s survived several large corrections in value.

    It is dynamic and democratic in how it functions, so can change to suit society’s needs if society embraces it.

    There is a lot wrong with it, and a lot right with it.

    To be fair it’s biggest battle in the coming years will be with the vast wealth and herd mentality of the institutional investors who will lose huge sums in a large correction and do more harm to bitcoin’s perception as some kind of pyramid scheme… despite them being the catalyst.

    • Eugen N says:

      DaveC

      I am not sure you know how much energy is used in mining cryptocurrencies. In my opinion all these energy is spent with nothing tangible to show for.

      Everything is pointless.

    • Peter Telford says:

      What problem does Bitcoin (and only Bitcoin) solve?

      The answer needs to be something pretty damn important, to start to justify the “proof of work” mining process which is wasteful by design. Useable energy supply is not abundant on a global scale, especially not when you factor in the climate impact of the supply.

      The moral problem with Bitcoin IMO is it inflates the demand for energy, helps to keep old dirty power plants running, diverts the limited supply of carbon neutral energy away from more socially purposeful uses.

      Unless there’s a benefit that can’t be delivered any other way, I would 100 times rather engage with those other crypto’s that don’t rely on “proof of work”.

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