Bitcoin Myths · #14 of 20

Bitcoin Has No Intrinsic Value

What Howard Marks Got Wrong About Bitcoin’s Value

In July 2017, Howard Marks sent a letter to his investors at Oaktree Capital, where he oversees more than $90 billion in assets. The letter was blunt. “Digital currencies,” he wrote, “are nothing but an unfounded fad, or perhaps even a pyramid scheme, based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.”

It is easy to dismiss this objection when it comes from a forum troll or a cable news anchor. It is harder when it comes from one of the most successful institutional investors alive. Marks is not reckless, not ignorant, and not acting in bad faith. He is applying a method he has used to generate consistent returns for decades. It is just the wrong one for Bitcoin.

When Marks refers to “intrinsic value,” he means something borrowed from traditional equity analysis. He means the value of an asset derived from its future cash flows, discounted to the present. By that standard, a company with strong earnings has intrinsic value and a startup burning cash does not. The approach is rigorous, well-tested, and entirely appropriate for productive assets. Bitcoin is not a productive asset. Neither is gold. Neither is the dollar in your wallet.

ARK Investment Management made this point in analyst research published in 2020. “Equity values are determined by discounting expected cash flows. A monetary asset like bitcoin, however, is nonproductive, its appreciation based on how effectively it preserves or enhances value over time.” The intrinsic value critique applies the right tool to the wrong category. It is not that Bitcoin fails the test. It is that the test was never designed for money.

The same critique, applied consistently, would dismiss gold, government bonds, and every fiat currency on earth. Critics who call Bitcoin valueless are, in almost every case, living their financial lives in assets that fail identical scrutiny. The question is not whether Bitcoin has intrinsic value by the narrowest possible definition. It is whether that definition is a coherent standard, applied evenly, to anything at all. It is not, and that is where the argument begins to break down.

Why Intrinsic Value Is the Wrong Framework for Money

The phrase “intrinsic value” sounds precise. It is not. In financial analysis it has a technical definition, the present value of an asset’s expected future cash flows. By that standard a profitable company has intrinsic value, a bond has intrinsic value, a rental property has intrinsic value. These are productive assets. They generate returns that can be modeled, discounted, and compared.

Gold does not generate cash flows. The dollar in your wallet does not generate cash flows. Bitcoin does not generate cash flows. All three are monetary assets, held not for what they produce but for what they preserve. Applying a discounted cash flow^{A method that values an asset by adding up the future cash it is expected to produce, adjusted to what that cash is worth today. It only works for assets that generate income.} framework to money is like using a thermometer to measure distance. The tool is not broken. It is just the wrong one for the job.

Wired magazine put it plainly in 2017, when Bitcoin was still widely dismissed. “Almost nothing in the world of trading and money has intrinsic value. Money has only the value that is ascribed to it over time.” The same piece turned to gold, which critics often cite as the standard Bitcoin fails to meet. “Gold itself has no intrinsic value. Its supply is limited, creating a relationship between supply and demand that cannot easily be manipulated. But gold itself has no value per se other than that ascribed to it by humans over time.”

This is not a new problem, and Bitcoin is not the first monetary asset to face it. In the late nineteenth century, William Jennings Bryan crusaded against the erosion of purchasing power caused by gold-backed paper money, arguing that paper currency was ephemeral and detached from value that could be recognized. His opponents made nearly identical arguments against his preferred alternative. You could replace the words “paper money” with “bitcoin” in most of those debates and be hard-pressed to tell them apart. Each generation meets a new form of money and applies the same objection. This thing is not real, it has no substance, it will not last.

The form of money is not arbitrary. History selects for specific properties, including scarcity, durability, verifiability, portability, divisibility, and resistance to manipulation. Gold earned its monetary reputation over thousands of years by possessing most of them. Paper money supplemented it by solving the portability problem, at the cost of introducing inflation risk. Bitcoin was designed from the beginning to possess all of them, and to solve the problems neither gold nor paper money could fully resolve. Understanding what the Bitcoin Standard means is the next layer of this argument.

Whether it succeeds is a separate question. But the objection that it has “no intrinsic value” does not engage that question. It imports a method from equity analysis, applies it selectively to Bitcoin while ignoring that it equally disqualifies gold and the dollar, and calls the result a verdict. It is not. It is a category error.

Bitcoin’s Value Is Technological, Mathematical, and Thermodynamic

If the intrinsic value test does not apply to monetary assets, the question remains. What does Bitcoin actually offer, and why would anyone hold it? The answer operates at three levels.

The first is thermodynamic. Bitcoin’s proof of work^{A consensus rule where miners spend real energy to add blocks, making the chain’s history expensive to rewrite.} requires miners to expend real-world energy to add transactions to the ledger. This is not a design flaw. It is the security model. Every block represents an irreversible expenditure of electricity and computing power. To rewrite a transaction buried ten blocks deep, an attacker would need to redo the proof of work for all ten blocks at once, while the rest of the network keeps adding new ones. The energy is not wasted. It is converted into the certainty that the ledger cannot be silently altered.

Adam Livingston, writing in The Bitcoin Age, puts it this way. “Energy is not wasted in Bitcoin. It is converted into trust, security, and decentralization.” Satoshi Nakamoto made the same point in 2010. “The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.” Bitcoin is the first monetary system to tie its integrity to physics rather than to institutional promise. The security is not a claim. It is a cost, paid continuously, in the real world.

The second is mathematical. Bitcoin’s total supply is capped at 21 million bitcoin, hard-coded into the protocol and enforced by every node on the network. No miner, government, central bank, or committee can increase that number. Every participant can verify the current supply at any time, at no cost, with nothing more than a computer and an internet connection. Livingston describes the cap as “hardwired into the very DNA of the system.” Gold grows by about 1.8 percent per year through mining, and the total amount remaining underground is unknown. Bitcoin’s terminal supply is provable. Gold’s future supply is not.

The third is functional. Bitcoin lets any person with an internet connection send any amount of value to any other person anywhere, without asking permission from a bank, a government, or any intermediary. The transaction cannot be reversed, frozen, or censored by a third party. The account cannot be closed. The funds cannot be seized through a letter to a custodian, because there is no custodian. Satoshi described this in the whitepaper as a peer-to-peer electronic cash system requiring no trusted third party. For hundreds of millions of people living under governments that freeze accounts, debase currencies, and restrict capital movement, the absence of a trusted third party is the entire value proposition. Why self-custody matters is the practical extension of that point.

None of these traits require belief in a particular price level. They exist independent of what Bitcoin trades for today. The ledger is secure whether Bitcoin is worth $1 or $100,000. The supply cap is enforced whether markets are up or down. The permissionless transfer works at any price. These are engineering properties, not speculative ones, and engineering features that solve real problems are, by any coherent definition of the word, value.

The Market Has Already Answered This Question

On May 22, 2010, a programmer named Laszlo Hanyecz offered 10,000 BTC for two pizzas. Someone took the deal. The pizzas were worth roughly $40.

This transaction is usually treated as a curiosity, a piece of folklore used to calculate what those 10,000 bitcoin would be worth today. That framing misses the point. The moment a rational person traded two real pizzas for Bitcoin, the market assigned Bitcoin a price. A price is not an assertion of value. It is evidence of it. If Bitcoin had no value, no rational person would surrender food for it. The pizza transaction is the first data point in an ongoing market experiment, now running more than fifteen years, in which buyers and sellers have continuously re-confirmed that Bitcoin is worth something.

The more instructive data comes not from the developed world but from the places where the need is sharpest. According to the 2022 Chainalysis Global Crypto Adoption Index, adoption is highest not in the United States or Western Europe but in countries with the most persistent monetary instability. Thailand, Nigeria, the Philippines, Argentina, and Indonesia sit near the top. These are not venture capitalists chasing a trend. They are people whose local currency has lost purchasing power for years, whose bank accounts are inaccessible to large parts of the population, and for whom sending money across borders means paying 5 to 7 percent to a remittance company. The World Bank estimated that in 2023, $669 billion in remittances flowed to low and middle income countries, money moving through a system designed to take a fee at every step.

Bitcoin solves a different and harder problem for a person in Argentina or Nigeria than for a person in New York. In Buenos Aires it is a hedge against a government that has repeatedly destroyed the value of its currency. In Lagos it is a way to receive money from a family member abroad without surrendering a week of wages to intermediaries. Wences Casares, who built one of the earliest Bitcoin exchanges and grew up in Argentina, has described watching his family’s savings destroyed by currency manipulation. That context does not make Bitcoin’s value sentimental. It makes it concrete.

The regulatory record makes the same argument from another angle. In January 2024, the Securities and Exchange Commission approved 11 spot ETFs^{An exchange-traded fund that holds actual bitcoin, giving investors exposure through a regulated brokerage account.} for Bitcoin. The SEC exists to scrutinize whether financial products have legitimate economic substance and to protect investors from instruments with none. Approving spot ETFs, which require actual Bitcoin custody rather than futures contracts, is a formal acknowledgment that Bitcoin has enough economic substance and liquidity to underlie regulated products. That speaks to legitimacy and demand, not to the contested label of intrinsic value, and that is rather the point. Serious institutions transact in it regardless of how the definitional debate is settled. The European Union reached a similar conclusion in 2023 when its Markets in Crypto-Assets regulation became law after three years of work. Governments do not spend three years writing legal frameworks for things they consider worthless.

The argument that Bitcoin has no intrinsic value rests on the assumption that markets, regulators, central banks, and hundreds of millions of ordinary people in the world’s most economically stressed countries are all making the same irrational error at once. That is possible. It is also the kind of claim that requires more evidence than a definitional objection.

Gold Has a Price Floor. It Did Not Protect Gold Holders in 1933.

The strongest version of the “no intrinsic value” argument does not come from Howard Marks. It comes from Peter Schiff. Schiff is a longtime gold advocate and one of Bitcoin’s most persistent critics, and his objection is more precise than the generic version. Gold, he argues, has an industrial utility floor that exists independent of its monetary demand. Gold is used in electronics, dentistry, aerospace, and medical devices. Even if everyone stopped treating gold as money, the metal would retain some residual value because industry would still need it. Bitcoin has no equivalent floor. If monetary demand for Bitcoin evaporated, nothing would remain.

This argument is accurate. Bitcoin does not have an industrial utility floor. That is not a concession to walk back or paper over. It is simply true, and an article that ignores it is not worth reading. The question is whether the floor matters as much as Schiff believes it does.

On April 5, 1933, President Franklin Roosevelt signed Executive Order 6102. It required every American to surrender their gold coins, gold bullion, and gold certificates to the Federal Reserve by May 1 of that year, at a fixed price of $20.67 per troy ounce. Failure to comply carried up to ten years in prison or a $10,000 fine. Within months, the government revalued gold to $35.00 per ounce. The people who had surrendered at $20.67 had no recourse. They received 59 cents on every dollar of gold’s new official price, paid in the currency of the institution that had just set that price. The industrial utility floor did not protect them. The government did not need gold for electronics. It needed the monetary premium, and it took it.

Gold’s physical form is its defining vulnerability. It exists somewhere. It has weight and volume. It can be located, inventoried, and compelled to move. A government that decides to confiscate physical gold has a clear path to doing so, as the United States demonstrated. A fuller comparison of gold and Bitcoin’s vulnerabilities is covered in Bitcoin Myths #13. The industrial floor provides a price floor under freely traded gold. It provides no protection against a state that decides the floor is not the point.

Bitcoin does not share this vulnerability. Bitcoin held in self-custody^{Holding your own private keys yourself, typically on a hardware wallet, so no third party can move or freeze your bitcoin.} has no physical form and no institutional custodian that can be told to freeze or transfer it. A government could make self-custody legally difficult, restrict exchanges, limit fiat on-ramps, and impose penalties. What it cannot do is issue the equivalent of Executive Order 6102 against a 12-word seed phrase^{A list of 12 to 24 ordinary words that backs up a wallet’s private keys. Anyone with the words can restore the wallet and spend the bitcoin.} memorized by its owner and replicated across nodes in 181 countries. The enforcement that worked in 1933 does not exist for Bitcoin.

Bitcoin’s floor is not industrial. It is functional. Anyone with an internet connection can send value anywhere without a bank, a government, or an institution. That utility does not require physical custody and cannot be seized by decree. Unlike gold’s industrial demand, which is relatively static, Bitcoin’s functional utility compounds as the network grows. Every new user, developer, and merchant strengthens the value proposition for everyone already in it. Schiff is right that Bitcoin lacks an industrial floor. He is wrong that this is the decisive objection. The floor he describes did not protect the people who needed protection most, at the moment they needed it most. Bitcoin is designed for exactly that scenario.

Howard Marks described Bitcoin as “based on a willingness to ascribe value to something that has little or none beyond what people will pay for it.” He was not wrong about how it works. He was wrong to think the pattern was unique to Bitcoin. Every monetary asset in history works the same way. Gold has the value people ascribe to it, sustained by five thousand years of consensus and a scarcity that cannot easily be faked. The dollar has the value people ascribe to it, sustained by the full faith and credit of the United States and the inertia of global trade. Bitcoin has the value people ascribe to it, sustained by mathematical certainty, thermodynamic cost, and a network of participants who chose it precisely because it asks nothing of governments or banks whose interests may not align with their own.

Whether Bitcoin has intrinsic value depends entirely on which definition is used. If the standard is industrial utility with a physical price floor, Bitcoin does not qualify. Neither does the dollar. Neither does gold, in any sense that held up when the state decided the floor was inconvenient. If the standard is whether an asset solves real problems that no alternative solves as well, for people who need it, at a scale that is measurable and growing, the question becomes much harder to dismiss. The people in Argentina and Nigeria and Thailand who hold Bitcoin are not doing so because they read a whitepaper and found the cryptography compelling. They are doing so because they have a government-issued alternative, and they have decided this is better.

This is one of twenty claims examined across the Bitcoin Myths series at allroadsbitcoin.com, where you can explore all 20 myths and everything published so far.

Everything on this site is for educational purposes only. It is not financial, investment, tax, or legal advice. Bitcoin carries real risk. Prices move. Do your own research, think for yourself, and speak with a qualified professional before acting on anything you read here.