Why Bitcoin Is Valuable Despite Having No Cash Flows: Bitwise CIO

Can Bitcoin really have value despite lacking any cash flows? In a Twitter post on Thursday, Bitwise CIO Matt Hougan argued why it can.

Where Bitcoin’s Value Comes From: Bitwise

According to the outspoken executive, what Bitcoin lacks in cash flow makes up for with a service: securing wealth without needing a bank or other intermediary.

“You can think of this like any other service,” he wrote. “For instance, Salesforce provides a service: the ability to track customer relationships and sales activities in a database.”

What makes Bitcoin different from Salesforce, however, is that people must pay a fee to Salesforce for the service it provides. Bitcoin isn’t a company but an open and decentralized protocol – and, therefore, requires no fees for access.

With this in mind, Salesforce and Bitcoin derive value from the same source—demand for their services. “If more people want Bitcoin’s service, the value of Bitcoin goes up,” Hougan wrote.

1/ Every day, a professional investor asks me how bitcoin can have value when it doesn't produce cash flows. Here is what I say…

— Matt Hougan (@Matt_Hougan) August 1, 2024

Hougan isn’t the first to praise Bitcoin’s “service” as a safe place to store wealth. Last month, BlackRock CEO Larry Fink called Bitcoin “an instrument that you invest in when you’re more frightened” or when countries are debasing their currencies.

The growing recognition of Bitcoin’s value contrasts years of criticism from skeptics who have long said the asset’s value is based on ‘thin air.’ Some critics like economist Paul Krugman stand by that position, writing in a recent New York Times article that Bitcoin remains “economically useless” aside from its role in “money laundering and extortion.”

Not Bullish Enough On Bitcoin

According to Hougan’s prediction, Bitcoin may be staged to accrue far more value in the near future, given the events of Bitcoin 2024 in Nashville.

Following endorsements from senators across the political aisle and promises from both Donald Trump and Robert Kennedy Jr. to establish a national Bitcoin reserve, the executive’s “sense of what’s possible in Washington on crypto has shifted.”

“For investors, these developments mean you need to reevaluate the scale of bitcoin’s potential near-term upside,” he wrote in a blog post on Tuesday.

Hougan floated the idea that a G20 country could soon attempt to “front run” the United States by adding Bitcoin to its balance sheet or that bipartisan legislation could pass on crypto faster than most expect.

“After what I witnessed last week, they look more likely than not,” he concluded.