One of the reasons that many people are still on the fence when it comes to choosing to use cryptocurrencies is because this type of currency does not have any intrinsic value. The intrinsic value, sometimes called the inherent value or the true value, is the perceived value of something including the tangible and the intangible factors. Many do not see these types of currencies as having any real value, and instead, they see them as being ephemeral or even transient. They believe that they have value currently only because we say that they have value.
Is Not Having Intrinsic Value a Problem for Investors?
At the outset, this does seem as though it could be quite a large problem. After all, it can be rather frightening to think that you are putting your real money into investments of digital coins that are potentially fleeting and that do not have any true value. However, if this is one of the main reasons that you have not yet looked further into cryptocurrencies, you might be surprised to learn that there are other types of investments that are popular and common that do not have intrinsic value either.
For example, gold does not have intrinsic value. Neither does a grain of salt for that matter. The reason that the intrinsic value cannot exist with these items or with cryptocurrency is because the value is subjective. The only place that any value exists for these items is in the minds of the people who are trading in it and buying it. They have value imparted by the investors with essentially a belief of how much value it might have based on the usefulness of the item.
Some might argue that gold has true value because it can be used in different products. However, the value of those products is often based on the belief of what they should be worth, not the value of the metal itself. As times change, gold changes in value based on how we are using it and how much we perceive that we need it. There is a belief that if gold did have inherent value, then no change in circumstances would drop the price of gold to zero. However, there is a real possibility that gold could one day not have any value for humanity. Thus, many experts agree that it does not have intrinsic value, just like the cryptocurrencies that we have today.
Yet, just because something might not have intrinsic value, it does not necessarily mean that it is going to be a bad investment. You just need to make sure that you are careful with investments in digital currency, just as you would be with any other type of investment that you make. If someone would invest in other items that do not have a traditional intrinsic value, they might still want to consider digital currency. Yet, they do need to be careful.
Often, the idea of intrinsic value, or lack thereof in this case, can cause people to believe that an investment in digital currency is entirely different from other types of investments because of that quality. However, that’s not the case. Even though there might not be what some would view as a traditional demand, there is still a demand for this type of currency, and that means that it is possible for it to be useful for more than just the fact that it can be used as money. It tends to be all of the other benefits of cryptocurrency, noted below, that show people that the currency, along with the blockchain, can provide value.
Are Cryptocurrencies Right for Everyone?
Not at all. There is a risk with this type of investment, just as there is with many other types of investment. Before you choose to make an investment with cryptocurrencies, whether Bitcoin or another type of digital currency, you will need to do your research. You want to make sure that you are making the right choice for the amount of risk that you want to take with your investments.
There are some dangers when it comes to cryptocurrency investments, but those dangers are not always tied just to the intrinsic value. You should have an understanding of some of the basic pros and cons before you choose whether or not to make an investment in this type of currency.
First, let’s look at a few of the pros of using and investing in digital currency. First, there is a potential for these digital coins to become quite valuable. It is decentralized, which means that it can’t be deflated or inflated based on what a central government does. The transactions are fast, easy, and permanent, and the way the system works makes it easy to trade no matter where you might be in the world. The transaction costs tend to be low, as well. Additionally, you will find that more and more people and companies are accepting these currencies as a form of payment today.
One of the other large dangers of cryptocurrency is the fact that this market tends to be rather volatile. This means that there are often large swings in one direction or another when it comes to the value of the currencies. There can be high rewards, but it comes with high risk. You will need to make sure that you are willing to take those risks when it comes to investing. Another issue is that if a coin is somehow lost during a transaction, there is no way to get it back. This is part of the ephemeral nature of the coin.
While it can be viewed as a problem that cryptocurrency does not have intrinsic value, as you can see, that does not mean that it is necessarily a bad investment. As long as you are smart about this investment, as you are with all others, you will find that it can be a good option. Just make sure that you understand your investment and be sure that you are not only investing in digital currency, or any one investment type for that matter.