Gold? Bitcoin? Dollar? What’s the “Real” Value?


What is a “real” valuation of something? Although there is a lot of discussion currently being bantered about on what the value of bitcoin is, let’s not be that specific. What is the “real” value of gold? A country’s currency? Real estate? Or, that shiny new vacuum cleaner you got your wife/partner for Christmas? Obviously a lot of variables (and biases) go into what “something” is worth. Overvalued? Undervalued? Is there actually a “real” value of something?

Enough with the philosophical. The simple common sense answer is value is what the price is at any given time. What a buyer and seller decide is an agreeable price. What “something” of perceived value can be exchanged for. For example, if I can exchange five gummy bear candies for a one dollar cup of coffee, each gummy bear is worth twenty cents. It’s pretty simple, actually.

Now, what the value of something is in the FUTURE is totally different and can get messy.

Let’s begin with the U.S. dollar. Gotta have it. It’s the world’s reserve currency (for now) and it’s true value is what it can be exchanged for, right? No reason to even discuss what “backs” the dollar. There is really no backing. Oh, the “full faith and credit of the government,” strong military, etc. etc. Yeah, yeah. But, what really IS the true value of the dollar?  For sure, the more the government prints, the less value it has……until?? Remember those gummy bears? What if I now need twenty gummy bears to buy that cup of coffee? Or thirty? What are those gummy’s worth? Maybe the dollar is really a big gummy bear.

Real estate? House for sale; gorgeous Southern California mansion on a cliff overlooking the ocean with breathtaking views. Seller asking $5M. Buyer says it’s about to slide into the ocean and offers $1.00. Buyer takes a chance house may have a few more years before sliding and closes sale at $1.5M. True value. Easy. Buyer and seller agree on value.

So that brings us to gold and bitcoin. These two are not so simple to value. Controversy, bias, passion, generational thinking and even political views all go into what people perceive as value. Throw all those things out and bitcoin is worth $17K and gold $1,750 (12/12/22 at 1:30MT). THAT’S what they are worth. THAT’S their value. No matter what anyone thinks, that’s their value.

Personally I don’t get gold. It’s a shiny rock. Just because its been around and used as a medium of exchange for 5,000 years doesn’t create a value. Gold doesn’t back a currency anymore. You can’t exchange it for a cup of coffee (or gummy bears). You can’t easily transport it (try and get it through airport security). It has not been a good store of value for quite some time. It costs money to store and insure. So, gold’s real value is just its price.

Bitcoin. The “new kid” on the block. Is BTC a new global currency, or just another fad? The “never bitcoiners” will say it has no value and is going to zero. The believers will counter with an ultimate value of $250K. $1M. Or……?????? It’s not where “geniuses” think it’s going, its true value is where it is now. Just like the dollar, if people have faith in bitcoin and can buy a cup of coffee with it (you can), it has a value. A price value.

So, remember that Christmas vacuum cleaner? You may think it has tremendous value as a gift, but unless your wife specifically asked for a vacuum it has zero value to her. Maybe wrap a gold necklace and toss in a couple of bitcoins if you value your relationship. Which, hopefully is priceless.