Receive our Daily Dispatch and Editors’ Picks newsletters. The usual tools of finance are no guide.
An equity is a claim on the assets and the profits of a firm; a bond entitles the investor to a series of interest payments and repayment on maturity. Bitcoin brings no cashflows to the owner; the only return will come via a rise in price.
When there is no obvious way of valuing an asset, it is hard to say that one target price is less likely than another. Bitcoin could be worth $10 or $100,000.
Bitcoin might triumph if currencies like the dollar and the euro succumb to hyperinflation, but there is no sign of that. A more likely scenario is that the technology that underpins bitcoin—a distributed ledger called the blockchain—proves so useful that it becomes widely adopted.
If so, bitcoin would become a vehicle for other services, and people would need to own some, or a fraction of one, to use them. But the original appeal of bitcoin was to the libertarian fringe and those who wanted to trade illegal commodities, like drugs, out of sight of the authorities. Read more from economist.com…
thumbnail courtesy of economist.com