If you’ve studied Bitcoin for more than a day, you have likely come across variations of this critique ad nauseam.

Alternatively, you may have heard it first during geopolitical analyst Peter Zeihan’s appearance on Joe Rogan’s podcast this month — when he echoed some of his incredibly unsophisticated views about Bitcoin to millions of listeners.

“There is no intrinsic value to this product,” he said. “What’s Bitcoin at, $16,000? It has another $17,000 to go down.”

I’ll ignore his nonsense about whether Bitcoin’s fixed supply is feasible (spoiler: it is) and instead focus on his first claim. Does Bitcoin really have no “intrinsic value?”

A Note About “Intrinsic Value”

I put the phrase “intrinsic value” in quotation marks because it's not a phrase that I — or anybody who understands value — would use.

There is no such thing as “intrinsic value.” Value is an entirely subjective measure of the regard or esteem in which someone holds something else.

You can’t measure value objectively. Even if observing a resource that all of humanity finds desirable (ex. water), you still couldn’t break the water down into its base elements and point out where the “value” is.

The best method we have for measuring value is monetarily, through a function of supply and demand.

Yet for any typical asset, supply and demand can widely vary based on locations, and fluctuate with time and cultural change. Thus, the inclination to assign any asset with a permanent, absolute value — such as $0 — is misguided.

Value VS. Use Case

Having said that, I don’t mean to suggest that the value of an asset is in no way predictable based on objective facts.

Some things are, in general, in higher demand than others. Food, for example, is consistently demanded by all of humanity, on a recurring basis. There will never not be some degree to which food is valuable.

Yet even with food, it isn’t usually a specific food itself that’s valuable to us, but the use case that this food provides us with.

For example, I value eggs enough to wish to spend money on them — above any other tastier breakfast food. Is that because I have an axiomatic, first principles adoration of eggs in and of themselves?

Of course not. I value eggs because I value having energy in the morning — and eggs contain the protein and fat content to give me just that.

In other words, eggs have nutritional properties that make them an effective tool for staying energized in my daily life. They serve a use-case.

More importantly: while value itself can’t be measured objectively, the effectiveness of a certain product in accomplishing its use case can be measured — based on its properties. For example, the physical properties of a brick make it objectively less viable as a food item than an egg — but more viable for use in building a home.

This is what most people are truly referring to when they use the phrase “intrinsic value.”

The real question is: Does Bitcoin have a use case? And what sort of price might that use case justify on the open market, based on the current circumstances?

What is Bitcoin’s Value?

As explained before, I can’t give you a hard and fast dollar amount to capture Bitcoin’s “inherent value.” Markets decide value depending on the ever-changing circumstances of supply and demand.

However, we might be able to find some general clues for explaining its past and future price behavior by examining Bitcoin’s objective properties. Like other commodities, Bitcoin operates by fixed, definable laws and limitations — except instead of being bound by the laws of nature, it is bound by the laws of code.

In fact, Bitcoin’s code was purpose-built with properties that make it hyper-optimized to serve one particular use case: money.

Let’s break it down: according to the Federal Reserve Bank of St. Louis, money is three things: a store of value, a medium of exchange, and a unit of account.

As such, there are six properties a good must possess to service all of these functions simultaneously. These include:

• Divisibility (Bitcoin can be broken down to the eighth decimal place — into units called “Satoshis”, which are currently worth fractions of a penny.)

• Durability (Bitcoin is electronic, so it doesn’t degrade over time)

• Fungibility (All units of Bitcoin are the exact same, making them interchangeable and easily tradeable.)

• Portability (Bitcoin can be sent to another person across the world instantaneously, for only a few Satoshis, when using the lightning network.)

• Scarcity (21 Million!)

• Acceptability: (Anyone on Earth with an internet connection can use Bitcoin, and those with modest software requirements can even run a full node by themselves.)

Think about it: These are not easy requirements to meet. Virtually all man-made products fail at being scarce, as there is an overwhelming incentive to produce more of that good the moment it acquires a monetary premium.

Once you’ve found a truly scarce good, the odds that it is divisible and portable in a way that makes it usable for trade in a modern economy is basically zero. Real estate, for instance, is scarce — but I can’t chop up a piece of land and use it to pay for a daily coffee.

Cash is the opposite: while it is widely accepted, liquid, divisible, and portable, it is not scarce. It loses value against assets that are scarce — like real estate — every year. It is also, of course, highly censorable.

Conclusion

Bitcoin not only has a use case, but it fulfills that use case better than almost all of its competition.

On top of that, Bitcoin’s use case is to be money itself. Of all of the use cases for which demand may fluctuate, money is perhaps the one universal constant — making it as close to “intrinsically valuable” as possible.

I personally use Bitcoin for this purpose — as both a store of value and a medium of exchange. It has worked well for me over the long term.

Sure, there are some very volatile periods driven by fluctuations in demand, waves of hype, overextended leverage, and macroeconomic policy along the way. But those come and go — while Bitcoin’s scarcity remains the same.

It doesn’t really matter whether or not you subjectively find Bitcoin valuable. All that matters are its properties, and whether or not those properties make it useful to people.

After that, it's up to the market to work itself out… and I have a hunch it will work out in Bitcoin’s favor.