I’m sitting at my kitchen table at 6:31 p.m. ET on Friday, December 1, 2017. The price of Bitcoin is $10,790.58.
It’s here that I’m reminded of something Warren Buffett’s often said. Price is what you pay, value is what you get.
So what value does a Bitcoin buyer get in exchange for $10,790.58 of his or her hard earned U.S. dollars? That’s what I’m going to attempt to answer in this article.
Before we can attempt to value Bitcoin, we first must agree on what it is. That turns out not to be so easy.
Is Bitcoin a currency?
Describing Bitcoin as a currency seems like a natural place to begin. After all, I’m told some retailers accept Bitcoin as a method of payment. On closer inspection, however, comparing Bitcoin to a currency is like comparing lightening to a lightening bug (apologies to Mr. Clemens).
As the WSJ has noted, Bitcoin is the hottest currency that nobody is using. As Jeffrey Dorfman here at Forbes pointed out, there are two problems with Bitcoin as a currency.
First, it’s too unstable. Who wants to accept something for payment that could drop in value by 25% before you have time to pour a cup of coffee? Put another way, would you accept Bitcoin as payment for a car you were selling if you had to wait 60 days to convert it to dollars? I doubt it…
Read Full: How Much Is Bitcoin Really Worth?