The Bitcoin value dilemma

There are fundamental misunderstandings around the inherent value of Bitcoin and L1 blockchain tokens. The common mistake is that people think these cryptocurrencies have no fundamental value because they do not create any cash flow the way a company does. This narrative usually dominates market sentiment during prolonged bear markets, but it’s a misguided and lazy concept that needs to be finally put to bed.

My counter-argument is this: How much cash-flow does the internet bring in? The answer is zero. Only the applications that are built on the internet generate value. Still internet is very valuable.

So we can’t keep thinking about Bitcoin, L1 tokens (or basically any Web 3 endeavour) in an overly simplistic, conservative way. Bitcoin, or Ethereum are not companies, therefore their value is not based on profits. They are more like shares in the building blocks of an entire new ecosystem. Now, let’s consider that we’re in the early days of the Internet, and you not just have an opportunity to invest in the infrastructure of this new system but to actually own a part of the network... Would you invest? Or you would you argue that no cash flow means bad investment?

A blockchain maintains a shared record of transactions and can support decentralized applications. That gives us a different question from the one we ask of a company: how useful is the network, and what role does its token play in that usefulness?

A decentralized blockchain offers a way to hold and transfer assets without relying on a single intermediary. Acting as our own bank also means taking responsibility for those assets and transfers. The value I see is in that change in control, rather than a promise that every network is equally secure or beyond interference.

Moving money across borders exposes how much the financial system depends on intermediaries, permissions, and administrative friction. That is a practical problem against which to judge a competing system.

Inflation raises another enduring question: how can people preserve purchasing power when their currency loses value? That question deserves serious attention regardless of which country or asset is in fashion.

That brings us to the argument for Bitcoin as “digital gold”. Its volatility makes the store-of-value question difficult. A spectacular return over one selected period does not settle that debate.

The lows can be painful, the highs exhilarating, and volatility frustrating. I am interested in how to value this kind of network over the long run. Bitcoin’s limited-supply rule is central to that discussion.

And if you think gold is better as a reserve asset, try to move it out of your country and see the bureaucracy play out again.

My point is simply that money, or gold is not as sacrosanct as it seems and in a gradually more muddy world, an asset class that provides answers on

1.) how to be more in control of our finances,

2.) how to simplify the movement of our money,

3.) and at the same time provides alternatives for us to be able to hold on to our purchasing power

should be met with at least an excited curiosity, and not a disdain backlash.

I think it is fine to buy a bit of bitcoins, whatever Buffet says ❤️