Last week we told you why Bitcoin is not a bubble and it has nothing to do with its price. Bitcoin is not a bubble because it does not generate cash flows and therefore, does not even qualify. Remember, our definition of a bubble is:
A bubble is the significant overpricing of a cash-flow-generating asset
relative to its intrinsic value.
We then presented you with a few examples of people and institutions who believe that Bitcoin is a bubble.
There is one alternative view that is worth exploring which would be along the lines of: “You guys restrict the definition of a bubble to cash-flow-generating assets only. One might as well change ‘cash-flow-generating assets’ to just ‘assets’ in your definition. Since Bitcoin’s intrinsic value is zero, it would be a bubble at any price. As such, the critics you disagree with actually have a valid point of view.”
A mathematician might tend to agree. “If a bubble can be had for a cash-flow-generating-asset with an intrinsic value of $1, why could one not have a bubble when the intrinsic value is zero? Intrinsic value of zero is simply a special case.”
That point of view is certainly not meritless. However, in this case, expanding the definition of bubbles to all assets does much more harm than good and we will tell you why.