Value and price are two different things. This is the problem with markets. They are very hard to rectify. What is valuable might be underpriced in the market, or reverse.

We see this all the time. In fact the market is rarely correct. It either overvalues something or undervalues it. Of course, this can flip back and forth on the same asset.

The world has been trying to value everything for a long time. The sad thing is accounting, bookkeeping, and all of finance has not done it. Crypto is no different.

Where does a stock derive its value from? The cashflow of the operations? Perhaps but what if it does not pay dividends like Tesla? Then how come the price went up so much. We know it is because of the growth potential so that is speculation. But then even the stodgy blue chip, dividend stocks are the same because there is no guarantee they wont encounter issues. Look at GM: paid the dividend for years yet had to be bailed out in 2008-2009.

So with crypto, it is no different. Where does the value come from? It is the intersection of where two people believe it is. If I am willing to pay $1,800 for Ethereum and you are willing to sell it to me for that, we establish the value. The next two players might disagree with us so that will change things.

It is why markets often are different from internal spreadsheets. We know cryptos that are used more will have more value. That is true for anything. The more people using Tesla, Apple, or Facebook products, the more valuable. How much so? That is what the markets decide.

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