Bitcoin Has A Hypothetical Value Of $1,800, Federal Bank Of San Francisco Says

A recent report issued by the Federal Reserve Bank of San Francisco discusses the volatility of the Bitcoin price – and its total impact on the ways Bitcoin should be classified in the future – whether that will be a currency, security or commodity.

The main author of the publication and an expert fintech policy advisor, Joost van der Burgt, confirmed what many already said: the Bitcoin straddles the properties of all the three (above mentioned) asset classes. However, he also made interesting points over properties which make Bitcoin blend into one category more than the others.

Burgt even showed historical evidence that suggests Bitcoin is in a bubble – without clearly stating if the bubble is real or not.

What’s most important is the price volatility of Bitcoin. As many would agree, this is the obvious reason why Bitcoin struggles as a real-world currency. Burgt looks closely at the ways it is currently used in the marketplace alongside the central banking structures.

The conclusion is that Bitcoin is not traded for goods. According to Burgt, the leading cryptocurrency lacks a corresponding real value which is a key part in exchange for goods. As he writes:

“…the exchange rate between two currencies can be regarded as a broad measure of the prices of one country’s goods and services relative to another country. When looking at the Bitcoin ‘exchange rate,’ this category of determinants seems to be inapplicable – there is no current native Bitcoin economy with native Bitcoin prices for goods and services.”

As a security, Bitcoin fares better in the current framework. However, it still doesn’t fit as either purchase, debt or stake in a company. As a commodity, Bitcoin behaves much like gold and oil, even though it lacks intrinsic value (which can be solved by mining).

“Although Bitcoins do not possess any real intrinsic value, from a commodity valuation perspective, we can estimate a hypothetical value based on its production costs. Recent estimates regarding the energy involved in mining a single Bitcoin by professional energy-efficient mining rigs put it at about $1,800 when mined in China (where 80% of the currently mined Bitcoins originate).” according to Burgt.

All in all, the hypothetical value of $1,800 is much lower than Bitcoin’s current price.