Claim 1: Bitcoin is overvalued

Bitcoin does not require refinancing First, bitcoin and the bitcoin system as a whole do not need refinancing, in
contrast to traditional investment vehicles. If traditional companies lose their
source of financing, for example because investors’ risk appetite changes, the
end of the hype – and of the company – will often be near. History provides
several examples for this. Remember, for example, the nationally and centrally
organised South Sea Company of John Law in the 18th century, the nationally
and centrally organised railway companies in the UK during the “railroad mania”
in the 19th century, the nationally and centrally organised internet stocks at the
end of the 20th century and numerous other well-known misallocations during
financial market history.

Decentralised systems have a higher Second, while all earthly creation is destined to die sooner or later,
survival probability decentralised systems are less vulnerable than their traditional counterparts. It
might be quite costly and take much effort to try and destroy the bitcoin system.
Just like the Hydra, global, decentralised and flexible open-source systems may
simply become bigger and even more decentralised – and thus stronger – if
they are attacked. This holds true even in case of significant damage to the
bitcoin network. In response to every attack on the system, the bitcoin
community updates the software and modifies the bitcoin protocol. This makes
the network more resilient, which is why bitcoin might considerably outlive the
usual length of past boom-bust cycles.

Bitcoin might change the valuation Third, despite these almost inevitable financial market cycles, some
system itself technologies have indeed gone on to change the world. The internet is a top
example. Even though many companies went bust shortly after the IT boom
around the turn of the millennium, the technology has deeply changed both our
society and our economy. Most technological revolutions and boom-bust cycles
have taken place outside the financial sector. This is why the valuation of bitcoin
is a bit of a challenge: you are effectively trying to determine the value of an
alternative monetary system which might change the value of the traditional
valuation system itself if it turns out to be a success.

These three features – no
refinancing needs, high survival probability of a decentralised system and
changes to the valuation system itself – already show that any attempts to put a
value on bitcoin are quite a complex endeavour.