The value of Bitcoin today is upward of 3.5 Trillion USD. To put that in perspective, if Bitcoin were a company, it would be more valuable than Microsoft, whose market cap is about 2.5 Trillion USD.
The valuation of a company is based on the problems it solves. Microsoft creates software products, which I use to write this blog. It also offers the cloud solutions on which enterprises run their business. It is a firm that is constantly innovating, and its board of directors are answerable to their shareholders. All these factors cumulate to sum up to the valuation of its stock price.
In comparison, what problems do Bitcoin solve?
Bitcoin is a digital currency that is a seen as an alternative to gold. It is not backed by any physical asset, software products or solutions. It derives its valuation almost entirely on the basis of its scarcity and cryptographic robustness. The price of Bitcoin is so high because its proponents believe in its story.
A story of a new store of value that is premised on scarcity and cryptography is worth more, as of today, than the largest corporation in the world.
But it does not end there. Every US dollar derives its ability to purchase bread, a plane ticket or an annual subscription to Office 365 merely because the world ‘believes in the dollar’. It isn’t backed by reserves of gold in Fort Knox or any other physical asset. The dollar derives its value entirely from our belief in its story. The rise of cryptocurrencies, at the very least, proves that there is room for alternative stories of money in the financial world.
Money is merely a story. And a story about a new kind of money can capture a greater share of our imagination than the largest corporation in the world.
However, a corporation is also merely a story we tell ourselves. It is stories all the way down.