What Exactly Is Intrinsic Value
This is a term that is tossed around a lot by “value investors”, such as Warren Buffet. These investors look for stocks or assets that are trading well below their intrinsic value. So what exactly is Intrinsic value?
Intrinsic value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model, rather than using the currently trading market price of that asset.
This is the description and explanation of what Intrinsic value actually means and comes from Investopedia. In a typical stock, this would be derived from examining the cash flow, revenue, PE ratios, and other metrics. To be honest, I don’t think that much of this data is even relevant anymore when assessing the current stock market. At the end of the day, Intrinsic value comes down to identifying the true value of an asset or stock. Price is often not a reliable indicator, as the market is often irrational.
Price action is also many times over-exaggerated to the upside, as well as the downside. Relying on price to establish an accurate value interpretation is not the best of approaches.
The Value Investor
This is the logic or reasoning that was instrumental in developing the concept of “value investing”. Warren Buffet is widely known as being one of the greatest value investors but he actually learned the art from another investor, Benjamin Graham. “The Intelligent Investor” was written by Graham and details much of the ideology of value investing and is where Buffet and many others were first introduced to this investment strategy.
In Simple Terms
If we take this approach into consideration and then proceed to explain it, we would arrive at a rather simple explanation. Intrinsic value is therefore the value or utility any one asset holds, regardless of price. When you take this into consideration, Buffet’s remarks about Bitcoin become even more hilarious because they are actually contrary to the thesis he upholds.
Bitcoin is making headlines at the moment and not only within the Crypto-based media. Mainstream media is even covering how Bitcoin has utilized the war in Ukraine to reveal its Intrinsic value and legitimacy. The market cap of BTC has even surpassed that of the Russian ruble, amidst political tensions.
In a time when banks are down, ATMs are empty and fiat currencies are collapsing, Bitcoin shines even brighter. Stating that Crypto is volatile, while the Ruble crashes 30% is rather ironic at best.
How much Intrinsic Value Does Bitcoin Actually Hold?
Bitcoin enables the owner to hold his wealth in a digital form that is not susceptible to rust, damage, the elements, or even time. It is easily transportable, unlike gold and real estate. Properties are not ensured against war damage, by the way. Bitcoin is also an independent network that does not require a third party in order to transact. It is liquid 24/7 and not limited by weekends, holidays, or even wars.
As I am writing, people are transferring value between one another in parts of the world where the banks are shut down and ATMs are empty. Bitcoin is providing financial services and support in a time when the so-called stable financial institutions have not only failed but are not even operational.
If you don’t consider that Intrinsically valuable, then you must be delusional, or quite simply completely out of touch. Either way, you cannot deny the tremendous value that a network like Bitcoin actually holds and contributes to the world.
Sometimes the existing technology has to face an extreme challenge in order to highlight the benefits and perks of newer and more innovative technology. The conflict between Russia and Ukraine is very sad and yet it is simultaneously revealing to the world how important and valuable Bitcoin is.