The Real Price of Bitcoin? According to Morgan Stanley, It's Zero

Real Price of Bitcoin

On the morning of December 27, 2017, bitcoin was worth slightly more than $15,400. But Morgan Stanley analyst James Faucette said the real price of bitcoin might be $0.

Business Insider reported that Faucette had sent out a note to Morgan Stanley clients before Christmas suggesting that the cryptocurrency’s true value could be zero, based on the fact that only few online retailers accept bitcoin, and that the number of retailers that do accept it is shrinking. "If nobody accepts the technology for payment then the value would be 0," Faucette said in his analysis.

 

Bitcoin has had quite the meteoric rise in 2017, increasing nearly 2,000 percent in value in one year. According to Coindesk, a site that tracks the cryptocurrency’s value, one bitcoin was valued at just under $1,000 on January 1, 2017. On December 16 — less than 12 months later — that price jumped to over $19,300.

But Faucette concluded that bitcoin can’t be considered a true currency, like the U.S. dollar or Euro, because the cryptocurrency doesn’t have an associated interest rate. He did concede it shared some similarities with gold, but unlike the precious metal, said bitcoin had no intrinsic value like gold does as jewelry.

Irrational Exuberance

Despite its popularity, many are wary that the bitcoin bubble will eventually pop and its high prices collapse. In September 2017, JP Morgan CEO James Dimon called bitcoin a “fraud” and claimed that he would fire any trader who was found to be trading in it. In early December 2017, one of Bitcoin.com's co-founders sold all his bitcoin.

Jeremy Eng-Tuck Cheah, an associate professor of finance at the Southampton Business School in the U.K., told Futurism: “At the moment, my personal assessment of the Bitcoin market is that it is largely driven by irrational exuberance given its recent launch on CBOE [Chicago Board Operations Exchange] that has piqued the interest of many investors not usually attracted to or exposed to investing in cryptocurrencies.”

Cheah agreed with Faucette’s assessment about bitcoin’s true value. “I remain unconvinced that Bitcoin as a cryptocurrency has any fundamental value and therefore, its price is largely driven by the supply and demand for the digital currency,” Cheah said.

“As Bitcoin prices do not seem to have any fundamental or underlying value, we are almost certain that investors’ sentiment is underpinning the supply and demand interactions in the Bitcoin markets now,” he concluded.

While Faucette’s conclusion is a bit grim, it’s important to remember that bitcoin is valuable in the sense that it can still be exchanged for more mainstream currency.

Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.

Editor's Note: This article has been updated to correct the identity of the c0-founder who "sold all his bitcoin."