Bitcoin’s Real Problem is Rumors and Gossips – Not Its “Lack of Intrinsic Value”

As The Economist magazine recently wrote, the crypto world is moving past the point where it can be considered its own self-contained world because “Crypto, like gold, is built on a collective belief about its value”. But the respected media’s drawing parallels between Bitcoin and a casino chip doesn’t look deep and convincing – as much as its assertion of “lack of intrinsic value” (in reality, crypto builds its intrinsic value on the very fact that fiat currencies have been losing their intrinsic values) – because none of them are up-to-date en-masse any longer. More interesting argument is the one presented by CNBC, saying volatility is the price that Bitcoin investors pay for its limited supply and its lack of an audit entity to control that supply — precisely the features proponents say give it value.

Indeed, the real concern about the crypto world is the single one – its excessive volatility. Whatever vocal defenders of Bitcoin like head of Heisenberg Capital Max Keizer tell us, that one Bitcoin equals one Bitcoin and never changes its value over time – it’s an unlikely a comfortable argument for most portfolio managers, because we still live in a dollar-denominated and dollar-dominated investment world.

The digital currency’s annualized 30-day volatility reached almost 117% on May 24, its highest since April 10, 2020. According to CoinDesk, this particular measure climbed to its most alarming level in more than 13 months shortly after bitcoin made two separate attempts to plunge below the $30,000 level. However, despite May’s rout, Bitcoin is up about 280% YoY, while second-ranked Ether is up 1,000%.

Another problem of major cryptos is their excessive susceptibility to various non-fundamental factors and judgments. For example, Elon Musk was seen actively tweeting on cryptocurrency on Thursday night and his meme posting spree led to declines in both BTC and ETH prices. Bitcoin (BTC) tumbled down after Tesla (TSLA) posted a meme on Twitter platform with a broken heart emoji. As we know by now, Musk’s tweet simply said Bitcoin with the broken heart emoji and appeared to feature a couple going through a divorce.

At around the time of Musk’s tweet, Bitcoin slipped from above $38,000 levels to current $36,800 apiece.

The celebrity entrepreneur often posts about Dogecoin (DOGE), which remained subdued on Thursday and was trading 6.98% lower at $0.39 at press time in a 24-hour period.

There is very little hope pointing to possibility of that sort of things diminishing their influence on cryptos over time – however, there are much firmer grounds to believe the above-mentioned audit – along with more thorough and diligent market research – will gradually outstrip all secondary factors dominating now while playing a role of vacuum fillers – particularly, various twits, rumors and hollow judgments.