Regarding Question 1 from my previous post on cryptocurrencies, I want to address an argument made by some proponents of cryptos. An example of this argument was made by Robert Breedlove, a popular proponent of Bitcoin, on the Mikhaila Peterson Podcast #124 (beginning at the 59:15 mark), in response to the question, “What about the fact that you can’t use Bitcoin physically for something.”

Breedlove’s answer was essentially as follows. Gold has two kinds of function and therefore two kinds of value:
1. “utility value,” that is, its value for use in jewelry, dentistry, computers, and the like.
2. “marketability”  or “monetary” value, that is, its value strictly as a medium of exchange—that is, its value strictly as money.
According to Breedlove, four fifths of the value of gold derives from this second value, the marketability value. Bitcoin, on the other hand, has “perfected” the concept of money and is “pure” money, because all of Bitcoin’s value inheres in its marketability value—that is, in its value as money.

In other words, according to Breedlove, the fact that Bitcoin has no “utility value” is a virtue, not a fatal flaw.

This argument by Breedlove, in favor of Bitcoin, has convinced me that Bitcoin is in reason worthless.

The “marketability value” of money is based on the fact that the money can eventually be used in a way that realizes its “utility value.” That is, gold used as money is inventory of gold that can eventually be used in jewelry or technology. If the utility value of gold were zero, then the value of all the inventory of gold would be zero.

The U.S. Treasury holds roughly 40 to 50 years worth of inventory of gold that is reasonably expected to be consumed in the U.S. (U.S. gold reserves are roughly 8,000 tonnes, and annual U.S. gold consumption is roughly 160 to 200 tonnes.) Taking another perspective, the U.S. Treasury holds roughly four years worth of inventory of gold that is reasonably expected to be consumed in the world for jewelry. (Annual world demand for jewelry is roughly 2,000 tonnes.) The precise number of years of inventory is not the point. The point is that the basis of value of gold money is that the gold money is inventory of gold that can be used for non-monetary purposes. If one of the U.S. Treasury’s bars of gold contained toxic impurities that would be extremely expensive to remove safely before the gold in the bar could be put to non-monetary use, then that bar of gold would be virtually worthless.

If the “utility value” of Bitcoin is zero, as Bitcoin proponent Breedlove claims, then the objective value of Bitcoin as money is zero.

To its proponents, Bitcoin is “perfect” and “pure” because the Bitcoin network is a pointer to a make-believe, Platonically perfect World of Forms—not to reality. Because Bitcoin does not exist in reality, it has no “utility value,” it is perfectly portable, it cannot be confiscated, and its quantity can be perfectly controlled. It is valued only by those who share the fantasy.

P.S.: God Bless Kyle. God Bless America.