There has been one big issue with these new cryptocurrencies since their beginning and subsequent expanding distribution. How are they valued? Do they hold any intrinsic value whatsoever?
Of course that is not the only issue surrounding them but it is certainly one of the biggest questions asked and also one of the most important ones to reach an understanding about especially if you are thinking about buying into these types of currencies.
A cryptocurrency only has value in its exchange – it has no inherent value – this is precisely the same as with a ‘conventional’ currency. A dollar is only actually worth what someone is willing to give you in exchange for that dollar.
If everyone were to stop accepting the dollar it would become worthless instantly. This is precisely how the financial market works, if globally the dollar becomes viewed as a bad investment it will ultimately collapse.
Cryptocurrency, just like the dollar, is only worth what someone will exchange for it. There is no Federal Reserve to issue new digital currency, theoretically making it more stable. Bitcoin for example, releases more of its cryptocurrency each year but the exact amount decreases proportionally year after year. The Federal Reserve, however, issues dollars in a reactionary fashion whenever it so chooses. Therefore, the more businesses and people that accept a form of a cryptocurrency – the more stable it will become.
In conclusion you could say that this questions has two answers. One view is that because cryptocurrencies in general are not tied to any physical commodity or other institution giving it a value it can not have any intrinsic value. At the same time the opposite can be argued that actually because it is not tied to any person, organization, country or regulation that can control it, it therefore has an intrinsic value in its ability to avoid being controlled.
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