The Node: Bitcoin Is 'Digital Gold' Because People Say It Is

In early March, the mobile software firm Meitu made headlines as the first public company to put ether (ETH) on its balance sheet along with bitcoin (BTC). Today, it announced another allocation to those two cryptocurrencies.

In its initial announcement, the firm said blockchain could disrupt finance and technology, like “mobile internet has disrupted the PC internet.” It holds a particularly high opinion of Ethereum and could imagine investing in projects or protocols, or even developing Ethereum-based applications. But it’s Meitu’s reasons for investing in bitcoin that actually bear examination.

One of several publicly traded companies to put bitcoin on its balance sheet over the past several months, Meitu thinks of the cryptocurrency as an “alternative store of value.” Amid “aggressive increases in money supply by central banks globally,” bitcoin has a chance of holding its value, a Board statement says.

But the consensus opinion around bitcoin is more important to Meitu than its fundamentals. Despite cryptographic features including limited supply, portability and fungibility, “[bitcoin’s] price is primarily a function of future demand that is driven by consensus of investors and the general public.” In other words, bitcoin excels as a store of value because that’s what other people say it is.

“Recently the Board has seen growing momentum in the consensus building process,” Meitu writes. It noticed “conservative institutions” such as insurance funds, asset managers and other publicly listed companies – like Tesla, unnamed – moving to accept bitcoin payments as well as adding it to their treasuries.

It’s common to describe bitcoin as digital gold, though as Meitu’s announcement shows, that may be little more than a meme. Bitcoin maintains its value because more and more people believe it will. As Bloomberg’s Tracy Alloway once argued, bitcoin is whatever you want it to be, making it “really the perfect post-modern financial asset.”

Last week, CoinDesk’s director of data and indexes, Galen Moore, wrote that bitcoin is less like digital gold, as it’s often described, than a $100 bill. Bitcoin, designed for online commerce, is a rarely used “bearer instrument” as well as a store of value. “[B]itcoin isn’t valuable necessarily because it is spent, but because it could be spent.” Presumably, there will be a counterparty on the other side of that transaction.

Does it matter why Meitu is investing in bitcoin exactly? Not really. It's all the same to BTC, which carries on regardless, whatever people think of it. But the statement does point to the meta-nature of modern investing, where memes mean as much as revenue and bottom lines.

As Satoshi said: "It might make sense just to get some in case it catches on."