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Technology

NYU's 'dean of valuation' says you can't 'value' bitcoin, only trade it

Written by finanster
on October 24, 2017
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Bitcoin is a currency, a noted New York University professor said in a blog post on Tuesday.

“I will argue that bitcoin is not an asset, but a currency, and as such, you cannot value it or invest in it,” wrote Aswath Damodaran, a professor of corporate finance and valuation at New York University’s Stern School of Business. He is sometimes called Wall Street’s “dean of valuation” for his work on evaluating the worth of prominent stocks such as Apple and Tesla.

“Since you cannot value Bitcoin, you don’t have a critical ingredient that you need to be an investor,” he wrote. “You can trade Bitcoin and become wealthy doing so, but it is because you are a good trader.”

Bitcoin topped $6,100 this weekend, up more than six times in price this year at a record high. The digital currency traded late Tuesday afternoon about 6 percent lower on the day at around $5,548, according to CoinDesk.

The professor said bitcoin is not an asset since it does not and is not expected to generate cash flows in the future. Damodaran also said the digital currency is not a commodity because it is not derived from a raw material to meet a fundamental need.

“The choice then becomes whether it is a currency or a collectible, with its supporters tilting towards the former and its detractors the latter,” he said.

Damodaran said he sees three possible paths for bitcoin as a currency. Listed from best to worst, they are:

  1. Global digital currency
  2. Gold for millennials
  3. The 21st century tulip bulb.

In August, he wrote a blog post discussing how bitcoin may just be a “dangerous pricing game.”

Programming note: Damodaran is scheduled to appear on CNBC’s “Fast Money” at 5:40 p.m., ET, Tuesday.

Source: Tech CNBC
NYU's 'dean of valuation' says you can't 'value' bitcoin, only trade it

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