From Pet Rocks to CryptoKittiesįor about 3 months in 1975, Pet Rocks were a hot item-over a million sold for $4 apiece making their creator wealthy, by standards of the times. The history of fake pets provides a nice illustration. And the internet allows peculiar social valuation to go viral, becoming truly weird. Bitcoin at present, looks like a classic collectible.īecause the value of useless collectibles is a purely subjective and often a social phenomenon, the valuation regularly confounds conventional analysis. Useless collectibles, I’ll call them, have no appreciable use as commodities and are not a claim to anything: if they have value, it is only because folks happen to value them. Anything about which I can say, “I have more of it than you” is a potential collectible asset. This post focusses on a far more entertaining question: Why does Bitcoin have value?Īside from currency there is second category of valuable-yet-useless assets: collectibles. I’ll make this case more fully in the next post on underlying structural problems with Bitcoin. While hard evidence is difficult to come by, nobody is claiming that a large share of the still-trivial number of daily transactions in Bitcoin are e-commerce as opposed to speculative investments or other types of non-commerce-related trades. An asset does function as a currency if it is used widely in a broad range of transactions. The trouble is that there is no evidence that Bitcoin is functioning to any significant degree as a currency.Īny asset could function as a currency. Bitcoin has been branded a currency, and some analysts-even some Fed economists-seem to have fallen for it, arguing that Bitcoin’s value as a transactions vehicle explains why this intrinsically useless item has market value.
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