Bitcoin has no intrinsic value

The argument

Bitcoin is a decentralized currency, and its proponents treat that as its principal virtue. The argument against it begins by asking what the absence of a centre actually removes. Bitcoin is not backed by any central bank, which means there is no institution that issues it, stands behind it, or is answerable for its value. That matters because of where the value of a currency comes from. A currency is not valuable in the way a commodity is valuable; nobody holds units of money for what they can be directly used for. Its worth rests instead on public confidence in the monetary system that issues it, the expectation, shared widely enough to be relied on, that the thing will still be accepted tomorrow by people one has never met. A central bank is the institution that underwrites that expectation, giving holders something to point to when asked why the confidence is warranted. Bitcoin, on this account, asks for the confidence while dispensing with what grounds it. Having no backing institution, it is not linked to public confidence in a monetary system at all; it is linked only to the willingness of other holders to keep holding, which is a belief about other people's beliefs rather than a foundation beneath them. Nothing underneath the price does any work, and nothing fixes what a unit is worth other than what someone will presently pay for it. A thing with no use value and no institutional backing has nothing left to make it worth anything. Bitcoin is therefore intrinsically worthless, whatever it may trade for at a given moment, and on this view something intrinsically worthless cannot be the future of money.

Context

The most successful currencies can be reliably counted on to maintain their value. Through the backing of a central bank, the fiat currencies (currencies issues by a central government, not backed by a commodity) receive a value based on the public trust in that central bank/government. In cases where that trust diminished to zero, the actual value of the materials involved in the production of banknotes and coins have a value (albeit tiny). Therefore, government-backed currencies can theoretically, never be valueless.

Premises

Counter-arguments

Many asset classes have no intrinsic value yet still command high and relatively stable prices. The global diamond industry is a glaring example of this. Diamonds have no intrinsic value, benefit, or function. Their entire value is dependent on supply and public demand. Yet diamonds are a relatively stable asset class. This is because, in economics, an item holds value for two reasons: utility or scarcity. Exactly like diamonds, Bitcoin has value because of its scarcity. There is not an infinite supply of bitcoin. The cryptocurrency has a cap of 21 million Bitcoins. In fact, this makes Bitcoin more valuable than many precious metals and minerals. Because it is man-made, there is no possibility of a hidden Bitcoin treasure trove being discovered and flooding the market.

Rejecting the premises

[Rejecting P2] The price of Bitcoin is not solely dependent on demand. It is also dependent on scarcity. [Rejecting P4] Bitcoin's scarcity gives it value.