Backed by Nothing
Bitcoin, like the US dollar, isn’t backed by any physical asset like gold. Its value is a consequence of the demand that people place on it, which has currently catapulted the price to about the $9,300 level.
Smith cites Fed economists who previously argued that “bitcoin units have no intrinsic value,” adding that neither does the US dollar, euro or Swiss franc. For instance, paper money is comprised of cotton and linen, which makes it cheap to make.
The US government abandoned the gold standard during the Depression and removed its international ties to the system in the seventies. Since that time, fiat money issued by the Federal Reserve isn’t backed by gold, but your money is still valuable.
While bitcoin is debated to be characterized as a currency, asset or investment, Smith says regardless of how you slice it, “bitcoin units have no intrinsic value.”
Her next argument is tied to the finite amount of bitcoin that will ever be created. As CCN’s recent reminder said, there’s only 21 million bitcoin in total supply…