What is bitcoin - product, asset or collectible?
Despite the fact that the whole world knows about Bitcoin, the debate about what it is is not going to subside. The essence of the problem is somewhat deeper than is commonly believed, since mankind has never faced anything like it, which means it has nothing to compare with. In essence, Bitcoin is trying to understand the best minds of our time, including Asvat Damodaran, a professor of finance at the School of Business. Leonard Stern of New York University. Not so long ago, Damodaran published a lengthy article where he talks about the role of Bitcoin.
Immediately I must say that the economist does not consider Bitcoin to be a fraud. He also claims that buyers of cryptomonet will not regret their action in the near future. At the same time, Damodaran believes that cryptocurrencies are unlikely to become a class of assets or somehow affect the change in the fundamental fundamentals of the market, including risk, investment or management.
The scientist claims that Bitcoin is a currency, not an asset, and here's why. It is not an asset for the simple reason that it does not generate cash flows for holders of cryptocurrency.
In addition, it is also not a commodity, because Bitcoin is not the raw material from which you can make something useful. A commodity, however, it can still become, if it becomes a necessary component of smart contracts. In this case, he will probably still be able to assume the role of a commodity.
The choice in this matter comes down to whether Bitcoin is a currency or a collectible. Both the first and second options have their supporters and opponents. According to Damodaran, Bitcoin is a currency, although at present it is not too good, because it has limited recognition as an intermediary in the exchange and high enough volatility, that is, it cannot be considered a reliable means of preserving value.
Now Bitcoin has the following properties:
The price of bitcoin in the future will largely depend on how well it performs the role of money. The more recognition he gets, the higher his cost will rise. If Bitcoin remains a niche currency, then after a certain time its rate will drop significantly. It will attract attention only during crisis periods. It may well happen that there will be something new that will eclipse Bitcoin. Then he is waiting for an unenviable fate.
Now the concept of "investing in Bitcoin" does not exist. There is only the opportunity to trade kryptomonetami. The problem is that the cost of Bitcoin can not be determined, as already mentioned above. This means that there is no basic concept of investment.
The price movement of cryptocurrency is caused not only by fundamental factors, but also by the mood of traders in the market and the overall market conditions.
If we consider Bitcoin as a currency, then it has three main usage scenarios:
Global digital currency . In this scenario, Bitcoin will be able to find recognition all over the world (which, in principle, is happening now), with the help of Bitcoin they will conduct a large number of transactions. But in order to play the role of a global currency, Bitcoin must be recognized by a large number of financial organizations, including central banks and governments of various countries. Only in this case, it will be widely distributed as a currency and will be able to compete with Fiat. The fact that Bitcoin emissions are limited, suggests a gradual increase in its price;
Niche currency . Perhaps Bitcoin will not be able to become a global currency, in which case it will be considered as a “safe haven”. This, above all, is about people who do not trust fiatnymi currencies, governments and central banks. In the near future, Bitcoin will be able to repeat the fate of gold, being a haven for everyone who is afraid of the depreciation of fiat currencies in a crisis time. Its price may rise during problematic periods and fall at a calm time from financial storms;
"Onion" . Many people know about the "tulip fever" of the XVII century. At that time, bulbs of certain varieties of tulips constantly grew in price, so rapidly that a week after the purchase, their price soared ten times. True, after the hype followed a very rapid decline, which led to economic problems. It is quite possible that the cryptocurrency exchange rate will fall, after which investors will begin to switch to other goals.
The economist, whose opinion we present here, advises not to buy Bitcoin at the current price, since he considers it to be overvalued, and it is impossible to draw any conclusions without estimating the value of cryptonoins.
Asvat Damodaran
Damodaran believes that Bitcoin will remain a niche cryptocurrency, that is, the second development scenario will be implemented. Nevertheless, there is a possibility of implementation of the other two scenarios. Of course, for the holders of bitcoins, the first and second options are more profitable.
So far, one has only to wait for the development of events to find out whether the economist was right in making his prediction.
Immediately I must say that the economist does not consider Bitcoin to be a fraud. He also claims that buyers of cryptomonet will not regret their action in the near future. At the same time, Damodaran believes that cryptocurrencies are unlikely to become a class of assets or somehow affect the change in the fundamental fundamentals of the market, including risk, investment or management.
The scientist claims that Bitcoin is a currency, not an asset, and here's why. It is not an asset for the simple reason that it does not generate cash flows for holders of cryptocurrency.
In addition, it is also not a commodity, because Bitcoin is not the raw material from which you can make something useful. A commodity, however, it can still become, if it becomes a necessary component of smart contracts. In this case, he will probably still be able to assume the role of a commodity.
The choice in this matter comes down to whether Bitcoin is a currency or a collectible. Both the first and second options have their supporters and opponents. According to Damodaran, Bitcoin is a currency, although at present it is not too good, because it has limited recognition as an intermediary in the exchange and high enough volatility, that is, it cannot be considered a reliable means of preserving value.
Now Bitcoin has the following properties:
- It can not be attributed to a particular asset class. At the same time, fiat currencies, such as the dollar, euro or yen, are also not asset classes;
- The intrinsic value of Bitcoin is not recognizable; you can only determine its price. It is worth remembering the definition of the term "cost" ;
- It can be considered a currency.
The price of bitcoin in the future will largely depend on how well it performs the role of money. The more recognition he gets, the higher his cost will rise. If Bitcoin remains a niche currency, then after a certain time its rate will drop significantly. It will attract attention only during crisis periods. It may well happen that there will be something new that will eclipse Bitcoin. Then he is waiting for an unenviable fate.
Now the concept of "investing in Bitcoin" does not exist. There is only the opportunity to trade kryptomonetami. The problem is that the cost of Bitcoin can not be determined, as already mentioned above. This means that there is no basic concept of investment.
The price movement of cryptocurrency is caused not only by fundamental factors, but also by the mood of traders in the market and the overall market conditions.
If we consider Bitcoin as a currency, then it has three main usage scenarios:
Global digital currency . In this scenario, Bitcoin will be able to find recognition all over the world (which, in principle, is happening now), with the help of Bitcoin they will conduct a large number of transactions. But in order to play the role of a global currency, Bitcoin must be recognized by a large number of financial organizations, including central banks and governments of various countries. Only in this case, it will be widely distributed as a currency and will be able to compete with Fiat. The fact that Bitcoin emissions are limited, suggests a gradual increase in its price;
Niche currency . Perhaps Bitcoin will not be able to become a global currency, in which case it will be considered as a “safe haven”. This, above all, is about people who do not trust fiatnymi currencies, governments and central banks. In the near future, Bitcoin will be able to repeat the fate of gold, being a haven for everyone who is afraid of the depreciation of fiat currencies in a crisis time. Its price may rise during problematic periods and fall at a calm time from financial storms;
"Onion" . Many people know about the "tulip fever" of the XVII century. At that time, bulbs of certain varieties of tulips constantly grew in price, so rapidly that a week after the purchase, their price soared ten times. True, after the hype followed a very rapid decline, which led to economic problems. It is quite possible that the cryptocurrency exchange rate will fall, after which investors will begin to switch to other goals.
The economist, whose opinion we present here, advises not to buy Bitcoin at the current price, since he considers it to be overvalued, and it is impossible to draw any conclusions without estimating the value of cryptonoins.
Asvat Damodaran
Damodaran believes that Bitcoin will remain a niche cryptocurrency, that is, the second development scenario will be implemented. Nevertheless, there is a possibility of implementation of the other two scenarios. Of course, for the holders of bitcoins, the first and second options are more profitable.
So far, one has only to wait for the development of events to find out whether the economist was right in making his prediction.
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