<blockquote>
<p>This would mean that cryptos don't actually have any real money in them and they could collapse without bottom basically.</p>
</blockquote>
<p>Short answer: Yes</p>
<p>Longer answer:
The value of bitcoin is what other people are willing to pay. If noone wants to buy bitcoin the value is zero.</p>
<p>Bitcoins are &quot;marketed&quot; as the new payment system with zero transaction cost. If true, it would be fantastic. In the meantime there are a number of issues with bitcoin -- I will list some, whether they are important is up to others to decide.</p>
<ul>
<li>Bitcoin is marketed as a payment currency / system. But compared to the total value of all bitcoins the payment flow is probably small. Most people hold bitcoins as speculative investments, not to pay for good or services. Compared to national and International payment flows the bitcoin usage is totally insignificant.</li>
<li>Bitcoins are forbidden in some countries, and more may follow. Polititians may believe either that they have no control or that bitcoins are mostly used for illegal transactions such as drugs (true or false, decisions are often made on beliefs).</li>
<li>Transactions are far from free: it is estimated that bitcoin mining currently uses about as much electrical energy as a smaller country, say like Netherlands. Energy usage is hardly free.</li>
<li>There is as already known no intrinsic value in bitcoins. It is really only a &quot;key&quot;. Compare to as example gold -- even if gold prices goes to zero you can actually use gold for making things.</li>
</ul>
<p>So the longer answer is still yes -- the value may go down to very close to zero. And it could happen in a very short time.</p>

CC BY-SA 4.0
2021-04-20T22:18:42.863Z
I agree with everything here, but people assume that they put their money in somewhere, it's invested and it will grow. But the problem with bitcoin is that you put money in it and other people will spend it. So there is no money in it, just until other people are willing to pay more for it. Like if you buy commodities, you invest betting on that the value of the commodity goes up(supply shortages, demand increase or for what ever reason).
ram4nd
CC BY-SA 4.0
2021-04-21T07:50:15.273Z
Yes, it similare to other speculative investments. Often stocks in "high-tech startups" (I only use this as an example) has a similar situation. What you invest in there is not the actual "intrinsic" value right now but you invest in the expected future increase in value. Not all wishes are fulfilled though, so some fail. Good advice generally is to never invest money you cannot afford to lose.
ghellquist
CC BY-SA 4.0
2021-04-20T18:55:05.980Z
2021-04-20T18:55:05.980Z
ghellquist
<p>As @RedGrittyBrick says, change the word &quot;bitcoin&quot; to &quot;euros&quot; and see if that helps you. <em><strong>All</strong></em> currencies work this way, not just cryptos:</p>
<blockquote>
<p>Is money that has gone into euros already spent? When I buy a euro from someone and they get USD I get euro. They go buy lambos or real estate for their gains. So the underlying currency is spent, but euro market cap is increased. This would mean that euros don't actually have any real money in them and they could collapse without bottom basically. Is this logic correct or is real really currency as value behind euros?</p>
</blockquote>
<p>And someone in Europe probably has the exact same question about USD.</p>
<p>All currencies are fundamentally worthless. Except for things like gold, which you can use to plate the contacts of electrical switches, coins, which can used as paperweights, and paper notes/bills, which can be used as toilet paper.</p>

CC BY-SA 4.0
2021-04-19T19:36:36.980Z
But bitcoin is not currency. Bitcoin is speculative asset.
ram4nd
CC BY-SA 4.0
2021-04-19T21:17:40.487Z
@ram4nd You keep saying that. How does that change in terminology affect the result? If I buy a painting or a house, I can say it has value, solely because someone else would pay an amount of money for it. Neither is a currency. Granted, a painting has some value to you personally when you look at it. But when you go to sell it, it is purely a speculative asset, and is only worth what someone will pay for it.
BWhite
CC BY-SA 4.0
2021-04-19T21:51:17.457Z
@ram4nd all the vendors who accept BTC as payment for goods and services would beg to differ...
Lawnmower Man
CC BY-SA 4.0
2021-04-20T04:28:23.767Z
@ram4nd "A rose by any other name would smell as sweet" - Bill
Aron
CC BY-SA 4.0
2021-04-20T10:01:30.237Z
@ram4nd yes, and so is any foreign currency. If that country goes up in flames, it's worthless. Calling it a "speculative asset" a) is not an argument at all and b) is not excluding it from being money.
Hobbamok
CC BY-SA 4.0
2021-04-20T12:09:46.187Z
Dollars are a bit less 'fundamentally worthless' because the US government is required to let you pay your taxes with them. This can't absolutely guarantee their future value (given the potential for hyperinflation), but it's a slightly stronger basis than pure speculation.
user3153372
CC BY-SA 4.0
2021-04-20T13:01:47.720Z
@LawnmowerMan All two of them!
Mason Wheeler
CC BY-SA 4.0
2021-04-20T14:05:02.810Z
@user3153372 A currency being [legal tender](https://en.wikipedia.org/wiki/Legal_tender) actually means that it has more uses than just taxes.
Philipp
CC BY-SA 4.0
2021-04-20T14:11:35.537Z
@user253751 You are trying to refute arguments I didn't make.
Philipp
CC BY-SA 4.0
2021-04-20T22:23:14.093Z
@LawnmowerMan They don't accept bitcoin, it gets converted. The store owner doesn't want bitcoin. But he doesn't care how you get your dollars.
ram4nd
CC BY-SA 4.0
2021-04-20T23:26:31.397Z
@ram4nd that's like saying Amazon doesn't accept euros because it converts them to dollars.  What the vendor does with with the currency once the transaction is complete is immaterial. Consider refunds. If you purchased a widget for 2 BTC, would you accept a 1 BTC refund because of currency volatility? That's grounds for a lawsuit.
Lawnmower Man
CC BY-SA 4.0
2021-04-21T17:12:04.080Z
@user253751 what is a PayPal dollar?
Lawnmower Man
CC BY-SA 4.0
2021-04-19T13:09:38.423Z
2021-04-19T13:09:38.423Z
Criticize SE actions means ban
<p>Bitcoin is like every other asset; it does not matter if you buy Bitcoin, or some stock, or a fond, a future, expensive cars or houses, raw materials, or even simply a foreign currency.</p>
<p>For all of these assets it holds true that they have almost no intrinsic value; they all only have the value that we as humans give them. Even food has no significant value if you've eaten and are full.</p>
<p>They gain value primarily because they are limited. To a starving person, the same piece of food that someone else would discard without a single thought may be worth more than a piece of gold.</p>
<p>All of these can &quot;collapse without bottom&quot;, in principle. A company can immediately go bancrupt without warning. A future can go wrong. Your expensive car can total, a meteorite can strike your house, your raw materials can get lost at sea, and your food storage can be decimated by mice.</p>
<p>The &quot;value&quot; we attribute to Bitcoin specifically is that at the time it tickled the fancy of those who wanted to have a currency which is not centrally controlled. Other virtual currencies (e.h., Ethereum) add more features due to supporting contracts or even games built on top of the currency. If the designers and developers manage to convince people that they want to buy this stuff, then it becomes valuable.</p>
<p>Someone commented that bitcoin is not &quot;real&quot;. Futures, ETFs and many other instruments are not &quot;real&quot; either, they are a pure bet on the future development of an underlying asset (which in turn might be virtual), or a mix of other assets. They are <em>backed</em> by something. Bitcoin is &quot;backed&quot; by a promise, an idea, or just the number of people already invested in it as well. Highly risky, yes, but nonetheless the same as many other assets.</p>
<p>And if you want to become more concrete, on a most technical level, the value of Bitcoin comes from the fact that we cannot conjure them out of thin air, but have to spend electricity. This is really a core (if not <em>the</em> core) function of the virtual currencies for now, if a little pedestrian. Obviously the energy has been spent and is now gone, so we cannot get it back. But this introduces scarcity, which often translates directly to value.</p>

CC BY-SA 4.0
2021-04-20T22:16:22.180Z
Bitcoin is not like every other asset, it's not real. Assets like company shares, real estate and commodities have value. Bitcoin has no value, it's virtual. These arguments seem very short sigted.
ram4nd
CC BY-SA 4.0
2021-04-21T06:08:05.160Z
@ram4nd: Lehman shares are worthless. Enron shares are worthless. Penn Central shares are worthless, even though it had _lots_ of real tangible assets. There are hundreds of 'superfund' sites where the land is worthless or has negative value -- people won't take it _even if you pay them_. Futures traders _actually did_ pay people to take 'spot' (physical) oil just a year ago. _Nothing_ has more value than what people will pay/exchange for it.
dave_thompson_085
CC BY-SA 4.0
2021-04-21T07:45:27.873Z
@dave_thompson_085 yes but there was a point when those companies had worth, until they messed up and broke their balance sheets. Oil has value, people have to move. Also price has fluctuations. If there was no manipulation(example: oil cartel OPEC). Then the price would be more stable and up to the market situation. Also FIAT system messes with markets. So I still would argue for real assets. But this is off topic.
ram4nd
CC BY-SA 4.0
2021-04-21T09:51:21.880Z
Futures and many other instruments are not "real" either. They are "backed" by something. And bitcoin is "backed" by something (a promise, an idea, or just the number of people already invested in it) as well. Highly risky, yes, but nonetheless the same.
AnoE
CC BY-SA 4.0
2021-04-21T09:53:48.050Z
I have also added this point to the answer; hope it helps to bring across my point better. @ram4nd
AnoE
CC BY-SA 4.0
2021-04-21T10:02:53.233Z
@AnoE I wouldn't say that bitcoin is backed same way as commodities. One has real backing, other has no real backing. Idea doesn't make bitcoin special there are 10k different cryptos. The number of people invested is the point of  this post, I am afraid that the money invested is already spent and gone.
ram4nd
CC BY-SA 4.0
2021-04-21T14:25:15.497Z
OK, then we will have to agree to disagree, @ram4nd, no problem. I cannot really offer a much better answer (or I would have) except to point out that bitcoin is not *that* different to other assets. I gave some reasonable examples where other assets may be more fleeting than thought at first glance. I gave the two actual "values" that bitcoin has (i.e., being scarce due to energy expenditure; and having the philosophical value of being a decentralized currency, for people who want to have such a thing). Maybe you find a better answer amongst the others... ;)
AnoE
CC BY-SA 4.0
2021-04-21T14:28:46.080Z
Even our hardest backing (gold bullion) has almost zero intrinsic value. You can't eat it. You can do very little with it. There are extremely limited technical processes where we actually require gold to create an item (jewelry aside). If all our gold reserves would go poof right now, nobody would care (except obviously, the financial sector). It's just valuable because people think it's nice and shiny, and in the distant past it was special because it didn't corrode. So - not much better than Bitcoin or other virtual currencies. ... That's it for me, over and out. :) @ram4nd
AnoE
CC BY-SA 4.0
2021-04-20T09:40:36.080Z
2021-04-21T09:53:31.473Z
2021-04-21T09:53:31.473Z
AnoE
<p>Bitcoin is separate from fiat (dollar or euro or any governement currency) people choose to exchange a certain amount of dollar for bitcoin, once the exchange is done, the buyer got bitcoin and lost his dollar and the seller got dollar and lost his bitcoin.</p>
<p>If peoples dont want to exchange their dollar for bitcoins, then yes the price will go toward zero.</p>

CC BY-SA 4.0
2021-04-19T19:38:05.943Z
But dollar gives bitcoin it's value. On it's own bitcoin is just a crypto token. Without current price, it's value is 0.
ram4nd
CC BY-SA 4.0
2021-04-19T19:44:16.777Z
But what give dollar its value ? except that dollar is a legal tender
Saxtheowl
CC BY-SA 4.0
2021-04-19T19:49:01.370Z
Since it's no longer backed by anything. It has no value, just like bitcoin. But the question is about the money that is in crypto, is it spent or is it there? It sure seems like it's all spent and it might be in a freefall at any moment.
ram4nd
CC BY-SA 4.0
2021-04-19T20:05:33.927Z
What gives bitcoin its value is not the dollar. Instead, what gives it value is the same as for any medium of exchange: the fact that you can buy stuff with it, i.e. the fact that sufficiently many people will accept it in exchange for goods.
Lee Mosher
CC BY-SA 4.0
2021-04-20T10:03:05.450Z
@ram4nd no, not really, all the other currencies give bitcoin value as well, and so do the people trading with it.  Which sounds like all the other currencies that exist: they have value because you can use it. Either for purchasing stuff or exchanging it for other currencies
Hobbamok
CC BY-SA 4.0
2021-04-20T14:24:01.953Z
@LeeMosher : Although Bitcoin can be considered as a form of currency and yes, *theoretically* you could buy something for it, the overwhelming proportion of its price is not because people want to use it as currency, but because people have seen it rise and hope it will continue to rise. Bitcoin might have its uses, but the price it is traded by today is orders of magnitudes higher than what it would really be worth if it was merely used for its original claimed purpose. So **no**, "the fact that you can buy stuff with it" is not what gives Bitcoin its current "value".
vsz
CC BY-SA 4.0
2021-04-19T13:05:48.867Z
2021-04-19T13:05:48.867Z
Saxtheowl
<p>What is the difference between a dollar bill and a piece of monopoly money? Both are just pieces of paper with some print on it. Sure, the dollar bill has security features, but we could easily print monopoly money with the some security features.</p>
<p>The main difference is that all people collectively pretend that the dollar has value. The same is true for any fiat currency.</p>
<p>Back in the days, silver (or gold) coins had intrinsic value - the value of the metals present in the coin. Nowadays, almost all currencies are fiat currencies. They are literally just pieces of paper. The only thing distinguishing the from normal paper is that people collectively pretend those bills have value.</p>
<p>If you ever travel outside the US, you might actually encounter people who don't want to be paid in dollar, especially in Europe. For us, a dollar bill literally is a printed piece of paper. You can't do anything with it, except exchange it for paper <em>we</em> think has value - the Euro.</p>
<p>The same applies to cryptocurrencies. Cryptocurrencies only have value because someone else is willing to pay you for it. Bitcoins do not have intrinsic value. They are just a crypto token. They have value because someone is willing to buy them.</p>
<p>It doesn't really matter if you think of Bitcoin as currency or asset.</p>
<p>Lets pretend you buy a piece of art. you start with $1k. You buy a painting for $750. You still have $250, but also a painting worth $750, so your net worth didn't change.</p>
<p>Replace piece of art in the above with either Euro or Bitcoin and nothing changes.</p>
<p>It only starts to change if the piece of art, or the Euros, or the Bitcoins aren't worth $750 anymore -- either more or less. Your net worth changes accordingly, but you still only have $250 in hand. Only when you <em>sell</em> the asset/euros/bitcoin again you will <em>realize</em> those gains.</p>
<p>All of those can &quot;collapse without bottom&quot; -- including the Dollar! A piece of art might become worthless in a post-apocalyptic world, or simply because the artist is no longer en vogue. The Bitcoin bubble might burst. A financial crisis might make Euros or Dollars worthless, if people no longer believe that those things have value and start to barter again. We have already seen currencies collapse, e.g. the Reichsmark. Or look at the Venezuelan Bolivar for another example of hyperinflation.</p>
<p>The Dollar used to be backed by gold (Fort Knox). So there <em>used</em> to be some value to a dollar bill (the amount of gold is was backed with). But that hasn't been the case for about four or five decades.</p>

CC BY-SA 4.0
2021-04-20T14:27:08.327Z
This might have been a useful answer it if wasn't so one-sided. It missed a *crucial* difference between the US Dollar and game money or Bitcoin: The US dollar also has a value because a government uses it to raise taxes, and gives you the right to be able to use it to pay any debt.
vsz
CC BY-SA 4.0
2021-04-20T16:40:37.997Z
@vsz That doesn't make it inherently valuable. Take the GDR. The GDR Mark or, "Ostmark", was the official currency. Yet there was rampart bartering in the GDR. If you wanted something special, you had to barter for it, because everyone had enough currency and due to planned economy, the stuff everyone wanted wasn't available. And sellers couldn't raise prices, so they wanted something else. or look at reichsmark. the currency collapsed after hyperinflation. being backed by a government doesn't make any piece of paper inherently valuable, a lot of land you can use *is*. Metals *are*.
Polygnome
CC BY-SA 4.0
2021-04-20T16:41:11.687Z
It's probably worth noting that the US never held enough gold to cover node in circulation and there were times when silver coins had a higher face value than their metallic value.  Exchanging actual gold (or any commodity) for goods and services is barter.  Gold being called 'money' implies there's some distinction between the actual substance's value and it's use in exchange.
JimmyJames
CC BY-SA 4.0
2021-04-20T16:47:03.930Z
@Polygnome The reichsmark failed because of political choices.  The idea that the Weimar Republic could have paid their war reparations in gold is ridiculous.
JimmyJames
CC BY-SA 4.0
2021-04-20T16:57:42.740Z
@JimmyJames Who says they could they  repaid their debts? I used it as an example to show that being backed by a government doesn't inherently make a currency valuable, unlike a plot of land, machines or labor, which can always be exchanged for something else.
Polygnome
CC BY-SA 4.0
2021-04-20T17:03:26.867Z
@Polygnome The point is that they purposely inflated their currency in extreme ways in order to make the extraordinarily large reparation payments.  It's totally irrelevant to the current world monetary system.
JimmyJames
CC BY-SA 4.0
2021-04-20T17:17:23.103Z
@JimmyJames So you say currencies can no longer collapse by governments doing stupid things?
Polygnome
CC BY-SA 4.0
2021-04-20T17:33:46.417Z
No.  But the idea that land and metals are inherently valuable is, um, questionable.  They are worth what people think they are just like anything else.  If you doubt that, I can show you some brownfield sites that are available for sale.  Of course, you won't be able to do a lot with them until you clean them up.  Gold's value is largely based on people believing it's 'real money'.  It sits in vaults and we pay people to guard it.  That's pretty much the opposite of useful.
JimmyJames
CC BY-SA 4.0
2021-04-20T09:46:34.737Z
2021-04-23T14:13:38.313Z
2021-04-23T14:13:38.313Z
Polygnome
<p>I don't really see much issue with the other answers but I think you are confused about some basic concepts here.</p>
<p>First of all, let's define market capitalization or 'market cap'.  This is simply price of a 'share' of an asset multiplied by the number of shares available.  This is a term that is usually used with relationship to stocks.  The implication is that this is what the market 'believes' the total value of the asset is.  For a company, it's roughly of the total value of the company.  As a side note, the idea of BTC having a market cap implies it's an asset. For 'currency' we would use terms such as 'money supply' and 'circulation'.</p>
<p>So let's talk about Lambo's for a second.  Let's say you sell some BTC, and buy a lambo.  The person you bought it from goes to the casino, and gambles it away.  The money is spent, gone.  Does the lambo have any 'money in it'?  It's lost some value but you should be able to find a buyer and get most of what you paid for it.  But let's say you then drive it into a tree and total it.  It bursts into flames as you escape and it is completely destroyed.  You pay to have the remnants of a lambo hauled away to a scrap yard.  Does it have 'money in it' now?</p>
<p>Money is a fiction: there's no such thing as 'real money', all money is imaginary.  But it serves a really useful purpose: it relieves us of the time and effort required to determine e.g. how many eggs a candle is worth.  When you buy BTC, you are giving up money and 'receiving' BTC in exchange.  What that BTC is worth to you is what ever you are able to get for it in exchange for something else.  What you exchanged for it in the first place is irrelevant.  These are independent transactions.  It's just like selling a home.  The buyer doesn't care how much money you spent on it or what you put into fixing it up, the price buyers are willing to pay is based on market value.</p>
<p>You might be thinking of so-called 'stable coins'.  These are digital currencies/assets that are 'pinned' to a fiat currency such as the US dollar.  Some countries do the same thing and tie their currency to the value of the USD.  The question is, though, do they actually have enough dollars to cover the pseudo-dollars they have issued.</p>

CC BY-SA 4.0
2021-04-20T22:14:21.623Z
Gold has value of the metal and silver is even better example. That is money and has been for thousands of years. USD was a substitution for gold, then it had value in the money itself. Now it's just FIAT, so no value in there. The point would be that all of the profits from bitcoin are spent, so there is no fallback price. It can go to zero like FIAT.
ram4nd
CC BY-SA 4.0
2021-04-21T14:05:57.070Z
@ram4nd Gold has the value that the market gives it.  If no one wanted gold, it would have no value.  There are plenty of worthless metals.  There are even metals with negative value i.e. you need to pay someone to take it away.  Gold was used as money because it's rare, easy to work, and hard to destroy.  You can bury it in a hole and expect it to still be there.  That's all.  Platinum is actually a superior metal for such use except ancient people couldn't smelt it.
JimmyJames
CC BY-SA 4.0
2021-04-21T17:33:43.410Z
gold has multiple uses in electronics. If you want technology you need gold, also monetary aspect, minging costs, jewelry. But I agree it's more of a hold in vaults metal. Silver has more uses in real life, half of the supply is used industrially. Those real attributes gives the metal intrinsic value. Bitcoin has no such values, it's intrinsic value is 0. It's a collectible internet token.
ram4nd
CC BY-SA 4.0
2021-04-21T17:44:56.597Z
@ram4nd Yes there are a handful things you can do with gold in industry, none of them impact the price significantly other than jewelry.  You seem to be missing the point.  Value is based on what we think things are worth: full stop.  The fact that things that are useful are considered to have value by people that might use them is pretty unsurprising.  I think BTC is a [ponzi](https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html) scheme personally but that doesn't change anything about what gives things value.
JimmyJames
CC BY-SA 4.0
2021-04-21T19:02:57.090Z
@ram4nd I just thought of a good example. Back when Rockefeller was getting rich selling kerosene for lamps, gasoline was considered a useless byproduct. It was literally just dumped on the ground. There wasn't any fundamental difference between the gasoline that people now spend significant parts of their income on in order to get around and the stuff that was considered a nuisance to be rid of. Gold is a commodity with an interesting history but its subject to the same laws of supply and demand as anything else. For example, it's rare now but there might be a lot more in the asteroid belt.
JimmyJames
CC BY-SA 4.0
2021-04-20T18:35:23.313Z
2021-04-20T18:35:23.313Z
JimmyJames
<blockquote>
<p>So the underlying currency is spent, but BTC market cap is increased.</p>
</blockquote>
<p>The &quot;Bitcoin market cap&quot; is a bit of a misnomer. Usually the term is referring to the &quot;total purchasing power of all bitcoins in existence based on the latest spot price of a trading pair with another currency&quot;.</p>
<p>You seem to assume that a trade has only one participant and the other side is some abstract construct like the &quot;market cap&quot; or the &quot;economy&quot;. Trades have two sides.</p>
<p>When you spend money, it's just somewhere else, it isn't gone. When you sell bitcoins for USD, the other party of that trade is buying bitcoins for USD. The &quot;market cap&quot; only increases if the exchange rate of bitcoin was higher in that trade than the previous spot price. If the exchange rate was lower, the &quot;market cap&quot; decreases. Similarly, when you spend either USD or bitcoins to purchase a sports car, you gain a car, and the car dealer gets they money.</p>
<p>Money inherently doesn't have intrinsic value, that's sort of its point. You may enjoy the article <a href="https://medium.com/coinmonks/bitcoin-has-no-intrinsic-value-and-thats-great-e6994adbfe0f" rel="nofollow noreferrer">Bitcoin Has No Intrinsic Value — and That’s Great.</a>.</p>

CC BY-SA 4.0
2021-04-24T06:49:45.600Z
Bitcoin has no purchasing power, only when it's converted to "real currency".
Actually historically money has intrinsic value and currency was a substitute to it. That system worked, this doesn't. History shows this very clearly.
ram4nd
CC BY-SA 4.0
2021-04-23T13:50:50.857Z
2021-04-23T13:50:50.857Z
Murch
<p>Is money that has gone into bitcoin already spent? When I buy a bitcoin from someone and they get USD I get bitcoin. They go buy lambos or real estate for their gains. So the underlying currency is spent, but BTC market cap is increased. This would mean that cryptos don't actually have any real money in them and they could collapse without bottom basically. Is this logic correct or is real really currency as value behind crypto?</p>

CC BY-SA 4.0
2021-04-19T12:29:59.463Z
Change the word bitcoin to euros and see if that helps you?
RedGrittyBrick
CC BY-SA 4.0
2021-04-19T19:39:28.030Z
@RedGrittyBrick So you say that bitcoin is a FIAT currency? I would disagree, bitcoin is speculative asset and taxed as such. It's only value is the current price, there is no ultimate underlying value.
ram4nd
CC BY-SA 4.0
2021-04-19T20:02:03.033Z
@ram4nd, sounds like you're trying to slight-of-hand the instability of value into saying it has no value.  Sure, talk till the cows come home about how it's a less stable value, but that whole conversation presupposes that there is at least some value.  And as long as there is some value, then see RedGrittyBrick's answer.
TheGrimmScientist
CC BY-SA 4.0
2021-04-19T20:48:40.487Z
What does "real money" even mean?
Tony Ennis
CC BY-SA 4.0
2021-04-19T20:53:11.973Z
@TonyEnnis In this context I mean currency what you use to buy bitcoin. But "real money" is historically gold and silver, and currency was substitute to that.
ram4nd
CC BY-SA 4.0
2021-04-20T04:24:43.803Z
What does "spent" actually mean? When I spend a dollar bill, does that make that dollar bill worthless?
Aron
CC BY-SA 4.0
2021-04-20T04:26:07.023Z
@ram4nd LMAO gold standard currency has long been replaced with fiat currency, or in the latin translation "its worth something because I said it is, now shutdup and use it".
Aron
CC BY-SA 4.0
2021-04-20T14:58:06.927Z
As Yuval Noah Harari put it, "_everyone wants money, because everyone wants money_".
Oscar Bravo
CC BY-SA 4.0
2021-04-20T18:02:42.450Z
See : [Velocity of Money](https://en.wikipedia.org/wiki/Velocity_of_money)
J...
<value>
Is money that has gone into bitcoin already spent?
ram4nd
# Is money that has gone into bitcoin already spent?

(Asked by: username_0 on 2021-04-19)

Is money that has gone into bitcoin already spent? When I buy a bitcoin from someone and they get USD I get bitcoin. They go buy lambos or real estate for their gains. So the underlying currency is spent, but BTC market cap is increased. This would mean that cryptos don't actually have any real money in them and they could collapse without bottom basically. Is this logic correct or is real really currency as value behind crypto?

**Tags:** value

> **Comments:**
> **username_1**: Change the word bitcoin to euros and see if that helps you?  
> **username_0**: @username_1 So you say that bitcoin is a FIAT currency? I would disagree, bitcoin is speculative asset and taxed as such. It's only value is the current price, there is no ultimate underlying value.  
> **username_2**: @username_0, sounds like you're trying to slight-of-hand the instability of value into saying it has no value.  Sure, talk till the cows come home about how it's a less stable value, but that whole conversation presupposes that there is at least some value.  And as long as there is some value, then see username_1's answer.  
> **username_3**: What does "real money" even mean?  
> **username_0**: @username_3 In this context I mean currency what you use to buy bitcoin. But "real money" is historically gold and silver, and currency was substitute to that.  
> **username_4**: What does "spent" actually mean? When I spend a dollar bill, does that make that dollar bill worthless?  
> **username_4**: @username_0 LMAO gold standard currency has long been replaced with fiat currency, or in the latin translation "its worth something because I said it is, now shutdup and use it".  
> **username_5**: As Yuval Noah Harari put it, "_everyone wants money, because everyone wants money_".  
> **username_6**: See : [Velocity of Money](https://en.wikipedia.org/wiki/Velocity_of_money)  

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## 7 answers

### Answer by username_7 on 2021-04-20. Score: 1 | Accepted answer

> This would mean that cryptos don't actually have any real money in them and they could collapse without bottom basically.

Short answer: Yes

Longer answer:
The value of bitcoin is what other people are willing to pay. If noone wants to buy bitcoin the value is zero.

Bitcoins are "marketed" as the new payment system with zero transaction cost. If true, it would be fantastic. In the meantime there are a number of issues with bitcoin -- I will list some, whether they are important is up to others to decide.

* Bitcoin is marketed as a payment currency / system. But compared to the total value of all bitcoins the payment flow is probably small. Most people hold bitcoins as speculative investments, not to pay for good or services. Compared to national and International payment flows the bitcoin usage is totally insignificant.
* Bitcoins are forbidden in some countries, and more may follow. Polititians may believe either that they have no control or that bitcoins are mostly used for illegal transactions such as drugs (true or false, decisions are often made on beliefs).
* Transactions are far from free: it is estimated that bitcoin mining currently uses about as much electrical energy as a smaller country, say like Netherlands. Energy usage is hardly free.
* There is as already known no intrinsic value in bitcoins. It is really only a "key". Compare to as example gold -- even if gold prices goes to zero you can actually use gold for making things.

So the longer answer is still yes -- the value may go down to very close to zero. And it could happen in a very short time.

> **Comments:**
> **username_0**: I agree with everything here, but people assume that they put their money in somewhere, it's invested and it will grow. But the problem with bitcoin is that you put money in it and other people will spend it. So there is no money in it, just until other people are willing to pay more for it. Like if you buy commodities, you invest betting on that the value of the commodity goes up(supply shortages, demand increase or for what ever reason).  
> **username_7**: Yes, it similare to other speculative investments. Often stocks in "high-tech startups" (I only use this as an example) has a similar situation. What you invest in there is not the actual "intrinsic" value right now but you invest in the expected future increase in value. Not all wishes are fulfilled though, so some fail. Good advice generally is to never invest money you cannot afford to lose.  

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### Answer by username_8 on 2021-04-19. Score: 12

As @username_1 says, change the word "bitcoin" to "euros" and see if that helps you. ***All*** currencies work this way, not just cryptos:

> Is money that has gone into euros already spent? When I buy a euro from someone and they get USD I get euro. They go buy lambos or real estate for their gains. So the underlying currency is spent, but euro market cap is increased. This would mean that euros don't actually have any real money in them and they could collapse without bottom basically. Is this logic correct or is real really currency as value behind euros?

And someone in Europe probably has the exact same question about USD.

All currencies are fundamentally worthless. Except for things like gold, which you can use to plate the contacts of electrical switches, coins, which can used as paperweights, and paper notes/bills, which can be used as toilet paper.

> **Comments:**
> **username_0**: But bitcoin is not currency. Bitcoin is speculative asset.  
> **username_9**: @username_0 You keep saying that. How does that change in terminology affect the result? If I buy a painting or a house, I can say it has value, solely because someone else would pay an amount of money for it. Neither is a currency. Granted, a painting has some value to you personally when you look at it. But when you go to sell it, it is purely a speculative asset, and is only worth what someone will pay for it.  
> **username_10**: @username_0 all the vendors who accept BTC as payment for goods and services would beg to differ...  
> **username_4**: @username_0 "A rose by any other name would smell as sweet" - Bill  
> **username_11**: @username_0 yes, and so is any foreign currency. If that country goes up in flames, it's worthless. Calling it a "speculative asset" a) is not an argument at all and b) is not excluding it from being money.  
> **username_12**: Dollars are a bit less 'fundamentally worthless' because the US government is required to let you pay your taxes with them. This can't absolutely guarantee their future value (given the potential for hyperinflation), but it's a slightly stronger basis than pure speculation.  
> **username_13**: @username_10 All two of them!  
> **username_14**: @username_12 A currency being [legal tender](https://en.wikipedia.org/wiki/Legal_tender) actually means that it has more uses than just taxes.  
> **username_14**: @user253751 You are trying to refute arguments I didn't make.  
> **username_0**: @username_10 They don't accept bitcoin, it gets converted. The store owner doesn't want bitcoin. But he doesn't care how you get your dollars.  
> **username_10**: @username_0 that's like saying Amazon doesn't accept euros because it converts them to dollars.  What the vendor does with with the currency once the transaction is complete is immaterial. Consider refunds. If you purchased a widget for 2 BTC, would you accept a 1 BTC refund because of currency volatility? That's grounds for a lawsuit.  
> **username_10**: @user253751 what is a PayPal dollar?  

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### Answer by username_15 on 2021-04-20. Score: 2

Bitcoin is like every other asset; it does not matter if you buy Bitcoin, or some stock, or a fond, a future, expensive cars or houses, raw materials, or even simply a foreign currency.

For all of these assets it holds true that they have almost no intrinsic value; they all only have the value that we as humans give them. Even food has no significant value if you've eaten and are full.

They gain value primarily because they are limited. To a starving person, the same piece of food that someone else would discard without a single thought may be worth more than a piece of gold.

All of these can "collapse without bottom", in principle. A company can immediately go bancrupt without warning. A future can go wrong. Your expensive car can total, a meteorite can strike your house, your raw materials can get lost at sea, and your food storage can be decimated by mice.

The "value" we attribute to Bitcoin specifically is that at the time it tickled the fancy of those who wanted to have a currency which is not centrally controlled. Other virtual currencies (e.h., Ethereum) add more features due to supporting contracts or even games built on top of the currency. If the designers and developers manage to convince people that they want to buy this stuff, then it becomes valuable.

Someone commented that bitcoin is not "real". Futures, ETFs and many other instruments are not "real" either, they are a pure bet on the future development of an underlying asset (which in turn might be virtual), or a mix of other assets. They are *backed* by something. Bitcoin is "backed" by a promise, an idea, or just the number of people already invested in it as well. Highly risky, yes, but nonetheless the same as many other assets.

And if you want to become more concrete, on a most technical level, the value of Bitcoin comes from the fact that we cannot conjure them out of thin air, but have to spend electricity. This is really a core (if not *the* core) function of the virtual currencies for now, if a little pedestrian. Obviously the energy has been spent and is now gone, so we cannot get it back. But this introduces scarcity, which often translates directly to value.

> **Comments:**
> **username_0**: Bitcoin is not like every other asset, it's not real. Assets like company shares, real estate and commodities have value. Bitcoin has no value, it's virtual. These arguments seem very short sigted.  
> **username_16**: @username_0: Lehman shares are worthless. Enron shares are worthless. Penn Central shares are worthless, even though it had _lots_ of real tangible assets. There are hundreds of 'superfund' sites where the land is worthless or has negative value -- people won't take it _even if you pay them_. Futures traders _actually did_ pay people to take 'spot' (physical) oil just a year ago. _Nothing_ has more value than what people will pay/exchange for it.  
> **username_0**: @username_16 yes but there was a point when those companies had worth, until they messed up and broke their balance sheets. Oil has value, people have to move. Also price has fluctuations. If there was no manipulation(example: oil cartel OPEC). Then the price would be more stable and up to the market situation. Also FIAT system messes with markets. So I still would argue for real assets. But this is off topic.  
> **username_15**: Futures and many other instruments are not "real" either. They are "backed" by something. And bitcoin is "backed" by something (a promise, an idea, or just the number of people already invested in it) as well. Highly risky, yes, but nonetheless the same.  
> **username_15**: I have also added this point to the answer; hope it helps to bring across my point better. @username_0  
> **username_0**: @username_15 I wouldn't say that bitcoin is backed same way as commodities. One has real backing, other has no real backing. Idea doesn't make bitcoin special there are 10k different cryptos. The number of people invested is the point of  this post, I am afraid that the money invested is already spent and gone.  
> **username_15**: OK, then we will have to agree to disagree, @username_0, no problem. I cannot really offer a much better answer (or I would have) except to point out that bitcoin is not *that* different to other assets. I gave some reasonable examples where other assets may be more fleeting than thought at first glance. I gave the two actual "values" that bitcoin has (i.e., being scarce due to energy expenditure; and having the philosophical value of being a decentralized currency, for people who want to have such a thing). Maybe you find a better answer amongst the others... ;)  
> **username_15**: Even our hardest backing (gold bullion) has almost zero intrinsic value. You can't eat it. You can do very little with it. There are extremely limited technical processes where we actually require gold to create an item (jewelry aside). If all our gold reserves would go poof right now, nobody would care (except obviously, the financial sector). It's just valuable because people think it's nice and shiny, and in the distant past it was special because it didn't corrode. So - not much better than Bitcoin or other virtual currencies. ... That's it for me, over and out. :) @username_0  

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### Answer by username_17 on 2021-04-19. Score: 2

Bitcoin is separate from fiat (dollar or euro or any governement currency) people choose to exchange a certain amount of dollar for bitcoin, once the exchange is done, the buyer got bitcoin and lost his dollar and the seller got dollar and lost his bitcoin.

If peoples dont want to exchange their dollar for bitcoins, then yes the price will go toward zero.

> **Comments:**
> **username_0**: But dollar gives bitcoin it's value. On it's own bitcoin is just a crypto token. Without current price, it's value is 0.  
> **username_17**: But what give dollar its value ? except that dollar is a legal tender  
> **username_0**: Since it's no longer backed by anything. It has no value, just like bitcoin. But the question is about the money that is in crypto, is it spent or is it there? It sure seems like it's all spent and it might be in a freefall at any moment.  
> **username_18**: What gives bitcoin its value is not the dollar. Instead, what gives it value is the same as for any medium of exchange: the fact that you can buy stuff with it, i.e. the fact that sufficiently many people will accept it in exchange for goods.  
> **username_11**: @username_0 no, not really, all the other currencies give bitcoin value as well, and so do the people trading with it.  Which sounds like all the other currencies that exist: they have value because you can use it. Either for purchasing stuff or exchanging it for other currencies  
> **username_19**: @username_18 : Although Bitcoin can be considered as a form of currency and yes, *theoretically* you could buy something for it, the overwhelming proportion of its price is not because people want to use it as currency, but because people have seen it rise and hope it will continue to rise. Bitcoin might have its uses, but the price it is traded by today is orders of magnitudes higher than what it would really be worth if it was merely used for its original claimed purpose. So **no**, "the fact that you can buy stuff with it" is not what gives Bitcoin its current "value".  

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### Answer by username_20 on 2021-04-20. Score: 2

What is the difference between a dollar bill and a piece of monopoly money? Both are just pieces of paper with some print on it. Sure, the dollar bill has security features, but we could easily print monopoly money with the some security features.

The main difference is that all people collectively pretend that the dollar has value. The same is true for any fiat currency.

Back in the days, silver (or gold) coins had intrinsic value - the value of the metals present in the coin. Nowadays, almost all currencies are fiat currencies. They are literally just pieces of paper. The only thing distinguishing the from normal paper is that people collectively pretend those bills have value.

If you ever travel outside the US, you might actually encounter people who don't want to be paid in dollar, especially in Europe. For us, a dollar bill literally is a printed piece of paper. You can't do anything with it, except exchange it for paper *we* think has value - the Euro.

The same applies to cryptocurrencies. Cryptocurrencies only have value because someone else is willing to pay you for it. Bitcoins do not have intrinsic value. They are just a crypto token. They have value because someone is willing to buy them.

It doesn't really matter if you think of Bitcoin as currency or asset.

Lets pretend you buy a piece of art. you start with $1k. You buy a painting for $750. You still have $250, but also a painting worth $750, so your net worth didn't change.

Replace piece of art in the above with either Euro or Bitcoin and nothing changes.

It only starts to change if the piece of art, or the Euros, or the Bitcoins aren't worth $750 anymore -- either more or less. Your net worth changes accordingly, but you still only have $250 in hand. Only when you *sell* the asset/euros/bitcoin again you will *realize* those gains.

All of those can "collapse without bottom" -- including the Dollar! A piece of art might become worthless in a post-apocalyptic world, or simply because the artist is no longer en vogue. The Bitcoin bubble might burst. A financial crisis might make Euros or Dollars worthless, if people no longer believe that those things have value and start to barter again. We have already seen currencies collapse, e.g. the Reichsmark. Or look at the Venezuelan Bolivar for another example of hyperinflation.

The Dollar used to be backed by gold (Fort Knox). So there *used* to be some value to a dollar bill (the amount of gold is was backed with). But that hasn't been the case for about four or five decades.

> **Comments:**
> **username_19**: This might have been a useful answer it if wasn't so one-sided. It missed a *crucial* difference between the US Dollar and game money or Bitcoin: The US dollar also has a value because a government uses it to raise taxes, and gives you the right to be able to use it to pay any debt.  
> **username_20**: @username_19 That doesn't make it inherently valuable. Take the GDR. The GDR Mark or, "Ostmark", was the official currency. Yet there was rampart bartering in the GDR. If you wanted something special, you had to barter for it, because everyone had enough currency and due to planned economy, the stuff everyone wanted wasn't available. And sellers couldn't raise prices, so they wanted something else. or look at reichsmark. the currency collapsed after hyperinflation. being backed by a government doesn't make any piece of paper inherently valuable, a lot of land you can use *is*. Metals *are*.  
> **username_21**: It's probably worth noting that the US never held enough gold to cover node in circulation and there were times when silver coins had a higher face value than their metallic value.  Exchanging actual gold (or any commodity) for goods and services is barter.  Gold being called 'money' implies there's some distinction between the actual substance's value and it's use in exchange.  
> **username_21**: @username_20 The reichsmark failed because of political choices.  The idea that the Weimar Republic could have paid their war reparations in gold is ridiculous.  
> **username_20**: @username_21 Who says they could they  repaid their debts? I used it as an example to show that being backed by a government doesn't inherently make a currency valuable, unlike a plot of land, machines or labor, which can always be exchanged for something else.  
> **username_21**: @username_20 The point is that they purposely inflated their currency in extreme ways in order to make the extraordinarily large reparation payments.  It's totally irrelevant to the current world monetary system.  
> **username_20**: @username_21 So you say currencies can no longer collapse by governments doing stupid things?  
> **username_21**: No.  But the idea that land and metals are inherently valuable is, um, questionable.  They are worth what people think they are just like anything else.  If you doubt that, I can show you some brownfield sites that are available for sale.  Of course, you won't be able to do a lot with them until you clean them up.  Gold's value is largely based on people believing it's 'real money'.  It sits in vaults and we pay people to guard it.  That's pretty much the opposite of useful.  

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### Answer by username_21 on 2021-04-20. Score: 1

I don't really see much issue with the other answers but I think you are confused about some basic concepts here.

First of all, let's define market capitalization or 'market cap'. This is simply price of a 'share' of an asset multiplied by the number of shares available. This is a term that is usually used with relationship to stocks. The implication is that this is what the market 'believes' the total value of the asset is. For a company, it's roughly of the total value of the company. As a side note, the idea of BTC having a market cap implies it's an asset. For 'currency' we would use terms such as 'money supply' and 'circulation'.

So let's talk about Lambo's for a second. Let's say you sell some BTC, and buy a lambo. The person you bought it from goes to the casino, and gambles it away. The money is spent, gone. Does the lambo have any 'money in it'? It's lost some value but you should be able to find a buyer and get most of what you paid for it. But let's say you then drive it into a tree and total it. It bursts into flames as you escape and it is completely destroyed. You pay to have the remnants of a lambo hauled away to a scrap yard. Does it have 'money in it' now?

Money is a fiction: there's no such thing as 'real money', all money is imaginary. But it serves a really useful purpose: it relieves us of the time and effort required to determine e.g. how many eggs a candle is worth. When you buy BTC, you are giving up money and 'receiving' BTC in exchange. What that BTC is worth to you is what ever you are able to get for it in exchange for something else. What you exchanged for it in the first place is irrelevant. These are independent transactions. It's just like selling a home. The buyer doesn't care how much money you spent on it or what you put into fixing it up, the price buyers are willing to pay is based on market value.

You might be thinking of so-called 'stable coins'. These are digital currencies/assets that are 'pinned' to a fiat currency such as the US dollar. Some countries do the same thing and tie their currency to the value of the USD. The question is, though, do they actually have enough dollars to cover the pseudo-dollars they have issued.

> **Comments:**
> **username_0**: Gold has value of the metal and silver is even better example. That is money and has been for thousands of years. USD was a substitution for gold, then it had value in the money itself. Now it's just FIAT, so no value in there. The point would be that all of the profits from bitcoin are spent, so there is no fallback price. It can go to zero like FIAT.  
> **username_21**: @username_0 Gold has the value that the market gives it.  If no one wanted gold, it would have no value.  There are plenty of worthless metals.  There are even metals with negative value i.e. you need to pay someone to take it away.  Gold was used as money because it's rare, easy to work, and hard to destroy.  You can bury it in a hole and expect it to still be there.  That's all.  Platinum is actually a superior metal for such use except ancient people couldn't smelt it.  
> **username_0**: gold has multiple uses in electronics. If you want technology you need gold, also monetary aspect, minging costs, jewelry. But I agree it's more of a hold in vaults metal. Silver has more uses in real life, half of the supply is used industrially. Those real attributes gives the metal intrinsic value. Bitcoin has no such values, it's intrinsic value is 0. It's a collectible internet token.  
> **username_21**: @username_0 Yes there are a handful things you can do with gold in industry, none of them impact the price significantly other than jewelry.  You seem to be missing the point.  Value is based on what we think things are worth: full stop.  The fact that things that are useful are considered to have value by people that might use them is pretty unsurprising.  I think BTC is a [ponzi](https://www.ic.unicamp.br/~stolfi/bitcoin/2020-12-31-bitcoin-ponzi.html) scheme personally but that doesn't change anything about what gives things value.  
> **username_21**: @username_0 I just thought of a good example. Back when Rockefeller was getting rich selling kerosene for lamps, gasoline was considered a useless byproduct. It was literally just dumped on the ground. There wasn't any fundamental difference between the gasoline that people now spend significant parts of their income on in order to get around and the stuff that was considered a nuisance to be rid of. Gold is a commodity with an interesting history but its subject to the same laws of supply and demand as anything else. For example, it's rare now but there might be a lot more in the asteroid belt.  

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### Answer by username_22 on 2021-04-23. Score: 0

> So the underlying currency is spent, but BTC market cap is increased.

The "Bitcoin market cap" is a bit of a misnomer. Usually the term is referring to the "total purchasing power of all bitcoins in existence based on the latest spot price of a trading pair with another currency".

You seem to assume that a trade has only one participant and the other side is some abstract construct like the "market cap" or the "economy". Trades have two sides.

When you spend money, it's just somewhere else, it isn't gone. When you sell bitcoins for USD, the other party of that trade is buying bitcoins for USD. The "market cap" only increases if the exchange rate of bitcoin was higher in that trade than the previous spot price. If the exchange rate was lower, the "market cap" decreases. Similarly, when you spend either USD or bitcoins to purchase a sports car, you gain a car, and the car dealer gets they money.

Money inherently doesn't have intrinsic value, that's sort of its point. You may enjoy the article [Bitcoin Has No Intrinsic Value — and That’s Great.](https://medium.com/coinmonks/bitcoin-has-no-intrinsic-value-and-thats-great-e6994adbfe0f).

> **Comments:**
> **username_0**: Bitcoin has no purchasing power, only when it's converted to "real currency". Actually historically money has intrinsic value and currency was a substitute to it. That system worked, this doesn't. History shows this very clearly.  

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