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Intrinsic Value

One of the most repeated questions about cryptocurrencies is what is their intrinsic value and why they are accumulating so much value if in fact it is just a simple software.

Those who are accustomed to reasoning about physical goods often find it difficult to understand an absolutely abstract concept, such as cryptocurrencies. 

What should be simple to comprehend is that its value lies precisely in the services they offer. Suffice it to think, metaphorically, of the value of a small magic suitcase that could contain an infinite amount of gold, and that could also teleport quickly to another magical suitcase at any distance. How much money would you be willing to pay for this service?

Cryptocurrencies allow you to conserve value, translatable in money, in a simple code, memorized, stored in an electronic device, or written on a simple piece of paper, in unlimited quantity; and transfer that value without the distance being a conflict.

If today the euro or the dollar is used as a currency, it is because we are obligated to do so, without there being any tangible, intrinsic value behind the piece of paper or the bank account, but rather those that are represented by the services offered and the corresponding government guarantee.

In the case of cryptocurrencies, there is no type of coercion that forces us to use them, or gubernatorial force that protects them. Its price comes from the market, and the merit it gives to the technology on which each cryptocurrency is based. That is, the application of free market rules: the price will be that in which supply and demand are found.

This could give you more security, especially as an investment alternative to traditional assets, which in any case, retain their own intrinsic risks. Risks that, as in the case of currencies in progress, are very difficult to identify and quantify.

How can we not think about the extreme case of Venezuela, where the illusion of being able to create wealth from nothing by minting more and more currency has contributed to the ruin of the whole country, where a taxi driver or fruit farmer prefers to be paid in cryptocurrencies and not in Bolivars. Logical, if we think that today a Bolívar equals a tiny portion of the euro, how much is it worth, for example, a bitcoin? 

As mentioned before, I consider it important to view cryptocurrency as an element of important diversification in the global investment portfolio itself. Because the classic assets of finance, such as currencies, stocks, bonds, real estate, commodities such as gold, all have their own risks hidden in their normal evolution, and in the structures of control and management that accompany them.

We could fill this article with cases in which some actions lost much of their value in the stock market overnight, or the loss of value of a good that was considered as safe as a property, but that would make for an extremely long list.

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