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Bitcoin Value = $ 0? Morgan Stanley makes an imperfect argument

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Earlier this week, Morgan Stanley, the third largest investment bank in the global financial market with a $ 95 billion cap market behind Goldman Sachs and JPMorgan Chase, said in a paper research that the future value of bitcoin could fall to zero, given its lack of "intrinsic value" and the base price.

A few days ago, James Faucette, a Morgan Stanley analyst, told bank clients and investors that it's hard to justify the current value of bitcoin and that the price of bitcoin could one day reach $ 0. He wrote:

  1. Very difficult question to answer, but some points to consider
  2. Can Bitcoin be valued as a currency? No. There is no interest rate associated with Bitcoin.
  3. Like the digital gold? May be. There is no intrinsic use as gold has in electronics or jewelry. But investors seem to value it.
  4. Is this a payment network? Yes, but it is difficult to save money and does not charge any transaction fees.
  5. Bitcoin average daily trading volume of $ 3 billion (last 30 days) versus $ 5.4 billion in the FX market.
  6. East. <$ 300 million in daily purchase volume versus $ 17 billion for Visa.

Faucette's highly critical and imprecise findings, sent to Morgan Stanley's clients, could turn against the bank as analysts at the bank encouraged Morgan Stanley's clients to reject Bitcoin and the market. cryptocurrency. based on false premises.

For starters, the lack of bitcoin interest rates is a feature, not a weakness, since the fixed supply of bitcoin is what gives its value to cryptocurrency. According to one of the most basic economic concepts, if the demand for an asset increases but its supply remains fixed or decreases, its value increases. Bitcoin, for the last eight years, has shown an increase in value because of its fixed offer.

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In October, CCN reported that even Mark Cuban, a bitcoin critic turned investor, said the concept of intrinsic value is flawed, primarily because the value of each currency and active in the global market is subjective. ]

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"It's interesting because there are a lot of assets whose value is simply based on supply and demand." there is no intrinsic value because you have no real property right and no voting rights.You just have the ability to buy and sell these shares.Bitcoin is the same, its value is based on the offer request, which I bought via an ETN based on a swedish exchange, " says Cuban.

Therefore, falsely condemning Bitcoin given its insufficient inflation rate and its intrinsic value is inaccurate and misleading, because the same argument can be applied to any currency or asset like the US dollar and gold. The US dollar and gold do not have intrinsic values. In 1933, as Lloyd Blankfein, CEO of Goldman Sachs, explained, the US government abruptly abandoned the gold standard and introduced the currency system, or sheets of paper representing the value of the gold standard. gold.

Over time, the representation of the value of gold by the fiduciary money was discarded and ultimately the US government began to provide quantitative easing or to print more US dollars. Currently, there is a demand for the US dollar because businesses and individuals use it to transact.

However, a fiduciary currency can also lose its value if demand falls, as the Venezuelan bolivar demonstrates to this day.

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Goldman Sachs and JPMorgan, two of the world's largest investment banks, have turned to the adoption and adoption of bitcoin, as well as other cryptocurrencies on the market. Banks that fail to adapt to the trend and who recognize the importance of the emergence of a new class of assets in bitcoin will inevitably isolate themselves .

Image from Shutterstock to photo

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