If Bitcoin and Cryptocurrencies Lack Intrinsic Value, So Does Fiat Currency

Economist Robert Shiller, a Nobel laureate, calls bitcoin an \"interesting experiment\" but argues it lacks intrinsic value and has no place in financial markets. His enthusiasm for blockchain, the tech

By James Gray·4 February 2015·1 min read

If Bitcoin and Cryptocurrencies Lack Intrinsic Value, So Does Fiat Currency

Key Points

Economist Robert Shiller, a Nobel laureate, calls bitcoin an \"interesting experiment\" but argues it lacks intrinsic value and has no place in financial markets.
His enthusiasm for blockchain, the tech

Economist Robert Shiller, a Nobel laureate, calls bitcoin an "interesting experiment" but argues it lacks intrinsic value and has no place in financial markets. His enthusiasm for blockchain, the technology behind bitcoin and other cryptocurrencies, remains strong. "I tend to think of bitcoin as an experiment. It is an interesting experiment, but it's not a permanent feature of our lives. We are over-emphasizing bitcoin, we should broaden it out to blockchain, which will have other applications."

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Blockchain is a blockchain that records cryptocurrency transactions. Shiller's doubts about bitcoin don't extend to blockchain.

The case against cryptocurrency—that it lacks intrinsic value—applies to every government-backed currency and every other asset traded globally. South Korea's economy imploded in 1997. Major conglomerates filed for bankruptcy and the financial system locked up. The won plummeted to 2,000 per dollar. By 2015, it had strengthened to 1,090 per dollar, less than half what it was at the crisis peak.

Sterling shows a similar pattern. A year ago, one pound exchanged for $1.80. In early 2015, it trades for $1.41. Governments don't set these rates. Buyers and sellers determine value through supply and demand.

Venezuela proves the point. The bolivar has collapsed so much that stacks of currency can't cover a meal. If the United States lost its economic dominance tomorrow, the dollar would crater the same way. No currency possesses intrinsic worth separate from what people and institutions will trade for it.

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