Gold has some intrinsic value. If nothing else, it has some industrial uses. Bitcoin has no comparable intrinsic value.
Owning a share of AAPL common stock has value. You get voting rights in the company. You also have a claim to Apple's assets, although with a lower priority than any bondholders or other creditors. So owning AAPL shares does come with obligations from Apple.
Euros (or dollars) also have some value as fiat currencies. You can pay debts and taxes in euros. The government has an obligation to accept euros as payment for taxes. So essentially these currencies are your ticket to stay out of jail.
Bitcoin doesn't share any of these qualities with gold, AAPL, or euros. That was the author's point and it still stands.
The value of gold is not based on its intrinsic industrial uses. It shares this characteristic with bitcoins.
> So owning AAPL shares does come with obligations from Apple.
Not in the sense OP used. He was very explicit:
> One is that they are convertible into something else, another is that the issuer will accept them as final means of payment from his debtors.
Apple stock is not convertible on demand into gold or cash, nor is Apple obligated to accept Apple stock in payment of its debts. By OPs definitions, Apple stock is not a financial instrument, and thus has no value. (Note: Of course, as ever, OP has used an incorrect definition, but that's neither here nor there.)
But again, according to OP Apple stock is not a financial instrument; it shares this characteristic with bitcoins.
> You can pay debts and taxes in euros.
No, I actually can't, no more than I can pay them in bitcoins. If I had some Euros I could trade them for my local currency and use that to pay my debts and taxes, but the same is true for bitcoins. We can argue that the market for euros is much more stable and liquid than the market for bitcoins (very true!), but this is a difference of degree, not a difference of kind.
The differences between bitcoins and gold, euros, or Apple shares are real and significant, but OP has failed to articulate them.
This makes the Euro a traditional currency which bitcoin isn't. That's not to say bitcoin is worthless, since its value is really whatever someone is willing to pay for it.
Indeed, I can't claim that. Nor am I. It definitely is!
> This makes the Euro a traditional currency which bitcoin isn't. That's not to say bitcoin is worthless, since its value is really whatever someone is willing to pay for it.
I don't think we disagree. :)
It's littered with idiosyncratic phrases and simply incorrect definitions. For example:
> Second, all financial instruments have a fair value that is defined as the discount value of future streams of monetary payments.
There's a grain of truth in there. Let's give the correct definition from Wikipedia:
> In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs)βthe sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.
In other words, it's nothing to do with "financial instruments"; it's how you value any asset. And it's not the "fair value" it's just one of many ways of valuing things. And it's not "the discount value" (as if there were only one), nor is it just "monetary payments"; rather it's all cash flows, in every direction, each one discounted appropriately.
And so on, and so forth. The author makes a big point of arguing that they aren't financial instruments so much as they are real assets. There's some truth to this; if I own a bitcoin nobody is obligated to give me anything in exchange; it doesn't exist as a liability on anyone's balance sheet. And? The same is true of a gold ingot. Or, largely, or a share of Apple stock; nobody is obligated to give you anything for that share. By the same logic, the "fair" value of gold (or Apple stock) is zero. Hell, the same logic would indicate the fair value of a Euro is zero. After all, nobody is actually obligated to give me anything for a Euro. I don't live in the EU, I have no EU debts, and no stores around here accept Euros. It's worthless! Except, you know, for the part where there's a large, liquid market where I can trade Euros for my local currency.
> Now what is the fair value of a bitcoin? It does not provide any income (Y = 0), it has no maturity given that it is not a financial instrument. For the sake of argument, we might assume that their maturity is infinite because we are stuck with them forever once they are created.
Taken literally, this means that you cannot sell a bitcoin. I would suggest that this is not true. You can actually sell bitcoins. People do this every day! In which case we plug in the expected value of the future sale in his fancy equation, discount it appropriately to account for the time value of money and the uncertainty of how much I'll get when I sell it, and find that...
...bitcoins aren't worthless. Huh, who knew?