If I can’t put this $100 into any usage, it is worthless. For instance, if the coffee shop, or the restaurant, or the hotel or any business in general refuses to accept fiat money, the value of that $100 will be zero.
This is technically true, but I think that would only be the case if you’re destroying the money. Otherwise, money you don’t spend today can be used in the future. Consider budgeting as a really common example. I might have $100 I want to use today, but instead I’m going to buy $100 worth of future groceries with it. You can also use money today to buy even more money in the future (and thus future goods and services) through savings or investing.
Even if you don’t know exactly what you want to do with it, not spending money lets you have the choice of spending in the future. This is useful if you think prices will be lower, or if there will be new options, or if you might have just missed something.
Intuitively, the value of a fiat money can be represented by the units of consumables one can purchase using that money. On the other hand, the exact answer to the question of “what IS the value of $100 fiat money” is not yet obvious (at least to me). One can argue that when 10 meals can be purchased using $100, the value of that 10 meals can be hugely different for different people in the different parts of the world. But this argument feels like trying to argue the value of 10 meals rather than the value of $100.
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Value of a business. Let’s say I am considering buying an Amazon online retail business. First I ask myself: How much am I willing to pay for this business? The answer to this question can be the value of that business. If I am willing to pay $10 million for the store, the value of that business is $10 million to me. If no one is willing to pay anything, the value of the business is essentially zero.
I think one thing that would help here would be to read about prices and where they come from, since I think you’re occasionally mixing up your value for things the the price. I think this article explains it pretty well: https://www.econlib.org/library/Columns/y2007/Robertsprices.html
I can’t tell, but I suspect this part of what’s making this hard for you to answer. If the question is just “What determines the price of a cryptocurrency?” then the answer is basically “supply and demand”. If the question is “How do individual people decide how they value a cryptocurrency?” then the answer is way more complicated (probably some combination of the price they think other people will pay for it, feel-good value of owning it / being part of a new thing, lowering the price to compensate for how annoying they are to use, raising the price because of how much easier it is to commit crimes with them, etc.).
I’m not sure if this really answers your question but hopefully it points in a useful direction.
For me, it is the latter question that I am interested in. I agree that if the question is about price, it is relatively straightforward. But I do believe that price is an important component of the valuation and the article you shared seems a good start for this angle. Thank you for sharing it.
This is technically true, but I think that would only be the case if you’re destroying the money. Otherwise, money you don’t spend today can be used in the future. Consider budgeting as a really common example. I might have $100 I want to use today, but instead I’m going to buy $100 worth of future groceries with it. You can also use money today to buy even more money in the future (and thus future goods and services) through savings or investing.
Even if you don’t know exactly what you want to do with it, not spending money lets you have the choice of spending in the future. This is useful if you think prices will be lower, or if there will be new options, or if you might have just missed something.
I think one thing that would help here would be to read about prices and where they come from, since I think you’re occasionally mixing up your value for things the the price. I think this article explains it pretty well: https://www.econlib.org/library/Columns/y2007/Robertsprices.html
I can’t tell, but I suspect this part of what’s making this hard for you to answer. If the question is just “What determines the price of a cryptocurrency?” then the answer is basically “supply and demand”. If the question is “How do individual people decide how they value a cryptocurrency?” then the answer is way more complicated (probably some combination of the price they think other people will pay for it, feel-good value of owning it / being part of a new thing, lowering the price to compensate for how annoying they are to use, raising the price because of how much easier it is to commit crimes with them, etc.).
I’m not sure if this really answers your question but hopefully it points in a useful direction.
For me, it is the latter question that I am interested in. I agree that if the question is about price, it is relatively straightforward. But I do believe that price is an important component of the valuation and the article you shared seems a good start for this angle. Thank you for sharing it.