In a recent Economic Club of New York event, tech investor Peter Thiel shared his thoughts on Bitcoin, explaining why he thinks the digital currency makes for a good “hedge against the whole world falling apart.”

Thiel shuns the mainstream “blockchain not Bitcoin” narrative.

He also dismisses the notion of Bitcoin as a payment system, stating that Bitcoin is “too cumbersome to use for payments for day-to-day transactions.”

Instead, Thiel sees Bitcoin’s advantage as a “store of value” that might replace gold:

“The question about something like Bitcoin is whether it can become a new store of value…And I think the thing it would replace is something like gold.”

That’s quite a bold statement considering that it dismisses Bitcoin’s transactional (payment system) and technological functionalities.

We’ve all heard debates surrounding the “intrinsic value” of Bitcoin—whether the digital currency has value or not.

Thiel obviously is on the “pro” side of this argument.

But if you think about it, the question “does Bitcoin have intrinsic value” is a badly stated question—a question that makes either answer, “it does” and “it doesn’t,” a poor answer regardless of its supporting argument.

You can get a logical answer from a badly formed question, but that answer will be as erroneous as the question itself.

This is similar to the classic Bergsonian analysis of the question “Why is there something rather than nothing?” which assumes that there is “more” in something and “less” in nothing.

In this classic analysis, Bergson shows that there is actually more in nothing than something. Here’s our adaptation of his analysis:

Imagine $100 (something). Now imagine the absence of that $100 dollars (nothing).

Brushing aside the basic fact that it’s impossible to imagine absolute “nothingness,” what’s clear is that there is more in the absence of the $100 than in its presence.

Here’s how: To imagine nothing in the case of $100:

 

  • Step 1: You first must imagine the $100
  • Step 2: You must negate it, or make it absent, in your mind
  • Step 3: You must also consider the motivation behind that negation (perhaps you were expecting to see an extra in your bank account).

 

That’s three operations, whereas imagining $100 is no more than two operations.

Let’s apply this mode of thinking to the question of intrinsic value.

Instead of asking whether Bitcoin has intrinsic value or not (in this case Peter Thiel says “yes”), what if we ask where intrinsic value resides or how it functions?

Is intrinsic value in the object itself, or in the attitude of the person holding it?

Here we’ll borrow from Carl Menger (read this article on Mises-org) who states in his Principles of Economics that “value is… nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needsand in consequence carry over to economic goods as the… causes of the satisfaction of our needs.”

If Menger is right, then the “value” exists in the “attitude” of the holder and/or party with whom you are about to make an exchange.

Taking this way of thinking a step further, if you store gold in a vault, you are storing a physical metal, but you are not storing the “attitude of value” in the vault.

When you make a transaction with gold, you are not transferring the attitude of value, but you are exchanging a metal to someone else who already holds the value of gold (or values it more than what s/he is about to exchange with you).

Back to Peter Thiel’s statement: “The question about something like Bitcoin is whether it can become a new store of value…”

It’s not much of a question at all with regard to Bitcoin’s inherent properties.

The question is whether people will have the same or a comparable attitude of value toward Bitcoin as Thiel has now.

And what comprises Thiel’s attitude of value, if not Bitcoin’s functionality as a payment system or its technological applications?

A mistrust in governmental and central bank mechanisms that control (and manipulate) fiat money; the very reason why Bitcoin was created in the first place; and the same reason why some investors choose to acquire and store physical gold.

“It’s this weird currency that’s not backed by any government…same thing’s true of gold.”

In this case, a “store of value” is a speculative projection that the attitude of value will continue to be directed toward a particular object, in this case Bitcoin.

You can view the entire talk here: 

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