A cashless society, a true alternative money, an asset backed currency as opposed to fiat money. That and other hopes filled the jackpot expectations of many. But what is the true value of a crypto currency from a fundamental point of view. Yes, blockchain technology is useful, an elegant solution to securely verify a transaction on decentralized ledgers.
So, using Bitcoin as an example, does it really matter if Bitcoin is traded at $0.1 or $1000’000? Does that momentary perception of market capitalization bear any real meaning? Let’s ask the question differently; what was Bitcoin made for? One might argue it was created to be a currency, indeed to purchase goods and services, to sell goods and services. Is that really taking place? Fact is that it’s real free trading ‘float’, the actual amount of bitcoin that is truly performing it’s function as a currency, is almost insignificant. Most of Bitcoin is locked and bolted in investor wallets. So even the amount available to investors, the amount that is actively traded is formidably thin. This very limited supply in circulation, the limited active float is the basis for this dramatic volatility over the last months.
Going back to the initial statement, does it really matter what Bitcoin is traded at? Not really, what really matters is if Bitcoin is fulfilling it’s true function, namely that of a currency. So far, that part is negligible.