First, while Bitcoin is often described as an emerging currency, its illiquidity — you can’t just buy groceries with it — makes it as an asset best-likened to gold. Throughout his annual shareholder letters, Warren Buffett repeatedly disavows acquiring gold, arguing that it isn’t something he can evaluate as a non-income-generating asset.

Indeed, as a value investor, Buffett has always been wary of evaluating an asset based on market expectations, which are impossible to predict. Despite attempts to calculate Bitcoin’s intrinsic value, the extent to which ambiguous probability governs its future enthusiasm therefore shows Bitcoin has two purposes: being a store of value, and being another volatile asset on which speculators can bet.

Nobel economics laureate Robert Shiller recently explained in a New York Times article how few people use Bitcoin as a store of value. But even then, it still doesn’t offer a unique comparative advantage over other assets.

Gold’s price offers a similar freedom from monetary policy — and, unlike Bitcoin, isn’t susceptible to a cyberattack. (If anything, Bitcoin’s value is always compared against fiat currencies, and so demand for it cannot totally escape the impact of monetary policy decisions.) At least the dollar retains value so long as there is public trust in the state.

And even the currency of prisons, cigarettes, is supported by material utility. On the other hand, as a speculative instrument, neither does Bitcoin offer a unique advantage. Read more from…

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