The idea that you can value bitcoin via P/E, utilizing mining fees as the "E" is incorrect. It's akin to valuing gold through P/E, by utilising the cost of extraction as the "E".
This is obviously wrong because holding gold doesn't entitle the bearer to a portion of those mining costs, same with Bitcoin.
The reality is that gold cannot be objectively valued because it doesn't have an objective value (beyond its industrial use, which accounts for less than 10% of its actual current price).
As a society, we collectively agree that gold is worth something because we agree that it is worth something.
With Bitcoin, we are doing the same. But if we had centuries to consolidate our appreciation of gold, we are compressing price discovery for Bitcoin in just a few years.
Interestingly, Bitcoin offers several improvements over gold (being digital, lightweight, cheap to move, proven limited supply). It also has drawbacks.
Lastly: the author's contention that you can take value away from Bitcoin by just copying its code is misguided. It would be akin to saying that you can replicate Facebook's valuation by copying its codebase. Facebook's value comes from its network. The same happens with Bitcoin, since its fundamental properties (censorship-resistance, security) are functions of network size and node-dispersion.
Indeed they are, I'm just pointing out that such can be fleeting. Facebook in particular is a good example of a second or third generation product gaining dominance.
I'm not sure "price discovery" is really what we're doing at the moment.
'E' here is really hypothetical future earnings. Some investors think that Amazon can raise prices and become profitable after creating the walled garden. Right now they only make money renting time on servers.
The idea is great, but in reality these stupid crypto coins are practically useless and wasting HUGE amounts of resources.
Bitcoin is said to be consuming as much power a some countries, and still rising fast, while the amount of transactions is comically low compared to the power consumption.
Bitcoin in its current state can never be a thing to actually buy something with. I don't see any other long-term use for bitcoin than just making a couple of bucks before it eventually crashes down like the Hindenburg.
I'm not saying that all cryptocoins will suffer that fate, but I truly believe bitcoin specifically will.
Gold mining is mostly strip mining tons of ore, spraying it with cyanide, collecting the runoff, and refining that. Then you pack up and leave before someone makes you clean up.
A very rough estimate: World wide Bitcoin mining operation spends per year around 60% as much electricity as all of USA's bank offices:
https://news.ycombinator.com/item?id=15615601
With Bitcoin mining there is a high incentive to actually use renewable energy sources and could be physically outsourced to places where building green power plants is otherwise not practical due to the limits of creating a power grid to make such a power plant profitable.
Yes, maybe it will become digital gold. If it were true digital gold, it would have a similar valuation closer to gold, i.e. $8tn (a 60 fold increase of its current value).
I don't know whether governments will buy Bitcoin, but I wouldn't consider it unlikely that some country decides to use crypto as a replacement to their fiat currency -- either the government of a developed nation does it, or the people just decide that their local money isn't worth the paper it's printed on, and decide to use some sort of cryptocurrency.
I know this sounds crazy, and I would've called it a ridiculous notion if someone told me this 5 years ago, but I don't consider it too unlikely anymore. It has grown on me.
Due to quantitative easing, money just isn't worth much anymore and asset prices have gone up a lot across the board. Just look at the recent acquisition of a painting by Leonardo da Vinci: $450m. That could not have happened 20 years ago.
Would a country whose currency isn't worth the paper it's printed on have the infrastructure to use BTC? Would they be able to afford the transaction fees?
BTC would really need the support of a developed government, but those governments aren't eager to give up control of their currency.
Not saying it will be Bitcoin. It could be Ethereum, or some other crypto with (very) low transaction fees.
I don't think Bitcoin is a currency anyway.
Building a crypto banking service that can be controlled through a phone (e.g. in Africa) should have tremendous value given the very high inflation in some countries there.
All that's required to to exchange gold is one person that has gold and another person who wants gold and has something the first wants to trade for it.
Or: for the majority of people, holding hold, recognizing gold, and exchanging gold is not possible. You need experts for that, and they all take commissions. And sometimes scam you.
You don't need experts; you can learn how to identify real gold yourself, in far, far less time than is required to learn to understand a cryptocurrency.
How do I know what? That it will crash and burn? Because it is a useless resource. It is only worth something because other people say it is worth something, and unlike paper money it is not backed by anything significant. It is a bubble of hot air, ready to pop at any time.
It might continue rising for years or decades. But it is not usable as a real currency, so it will always remain a useless waste of resources.
There might be a replacement cryptocoin that will actually be useful in the future, but it won't be bitcoin. Bitcoin will be the thing that started the "future", but it will not be the thing that remained the future.
>> It is only worth something because other people say it is worth something
That is actually the very definition of most currencies currently in use [1]. Money is actually just a promise that someone will provide you goods or services in exchange for it sometime in the future, it has no intrinsic worth. Also, paper money isn't tied to anything [2] either, let alone the "digital" money we have in the banks.
"Fiat" money is backed by enormous sums of debt repayable only in that currency and a tax burden representing a large proportion of GDP payable only in that country, and its supply is kept in balance with demand on a day to day basis by central banks.
(And even then, people are entirely justified in worrying that certain currencies will struggle to retain value because their state and central bank are very bad at doing the latter jobs)
So it's basically backed by years' worth of guaranteed future demand to obtain that currency from people who will therefore be willing to provide goods and services in return.
Never have seen this so well explained. Alternatively, fiat can be printed. So there is a case for something that is limited, transportable etc. You can always sell your bitcoin to pay the taxes. Is just that the limited comodity would have the tendency to sell for more if the fiat is being printed
Money is traditionally backed by something though right? Isn't a currency a bunch of tokens with an army? Where's the Bitcoin army when I need them to enforce my contacts?
Actually, the main thing that gives money value is the fact that you have to pay your taxes in it. If you live in the US, you might be able to live day-to-day with nothing but BTC but when tax time comes you'll be converting some of that to dollars or facing some ugly consequences.
Not really, see e.g. the 2012-2013 financial crisis in Cyprus, there was no "army" to enforce that people got all their money back... [1] The only thing that keeps the system working is trust (see other reply to my initial comment that explained it more thoroughly).
Though I agree that there is a lot less "backing" of Bitcoin in that sense, nothing protects you from losing everything if something goes wrong.
To be fair, I don't think paper money is backed by anything more than "trust" in the goverments that print it, and that people will accept that as payment.
If you "trust" the bitcoin network, and think that someone may accept bitcoin in exchange for something that you want, it looks pretty similar (obviously not comparable in scale yet)
Paper money also worth something because other people say it's worth something. You can't buy anything with Czech krones in some Kenyan village, because people there don't its worth.
What do you mean by 'anything significant'? Paper money is not backed by anything material. Rather, it is backed by institutions (central banks, governments, banks) and individuals using them. To me, that's pretty much the same as cryptocurrencies.
I think that was the point he was trying to make. Without major support of such institutions / individuals, bitcoin won't catch on as a "real" currency.
I don't get this. The dot-com bubble ran up to $6.7tn in market cap, in 2000, before crashing down to $1.7tn.
The crypto space, which seems to be shaping into an entirely new asset class, has a $300bn valuation. That's less than the value of Facebook.
The only reason why people are shouting bubble is because people were able to get in from the start, when these coins were 10 cents on the dollar. But when Facebook IPOed after 10ish years, it had a valuation of $50bn. But early angel investors also got in at 10 cents on the dollar.
It could eventually become a bubble, but I don't think think we're even nearly there yet.
I'm not sure I understand what you're saying. That a bubble has to be bigger before it can be called such? That you feel there's some fundamental value there to provide a floor price in the event of a crash? Genuine question
Gold has close to no use cases (80%+ is store of wealth) and seems to be doing fine at an $8tn global market cap.
Of the potential 21m Bitcoin in existence, 4m are assumed to have been permanently lose. 16m have been mined. That leaves 1m coins left to be acquired in the future.
Gold has had many uses in the past and continues to in the present. Sure, there's a load of gold in various national vaults but the fact that gold emerged as a standard for minting coins in multiple independent countries shows that it held some meaningful value.
You can't suggest with a straight face that all the speculation in bitcoin is because of its potential and not because people see the price going up and decide they're going to buy with intent to sell too.
I get what you're saying, but your math is a bit misleading. As far as I know, the missing 4m are a subset of the 16m already mined. That still leaves ~5m to be acquired in the future, albeit rather slowly.
Is there a timeframe for how long it will take for those 1m coins to be mined? Is it equally likely that the price craters or skyrockets once that happens?
I think the price will skyrocket anyway, because there is a limited supply. In a way, I believe it could be like an epic short squeeze. You have people wanting to buy in (retail + institutional money is coming in) over the next few years.
If you take the example of oil -- once the price of a barrel goes over a certain threshold price, you'll go and explore new wells that were previously not profitable. And you will eventually get more supply after a while. That's just not the case with Bitcoin (and probably Ethereum after next year).
Old saying: "What's common in every bubble is the belief that this time, it will be different." -> if you invest in cryptocurrencies, make sure not to invest more than you can comfortably lose (probably a few percent of your overall funds).
I think it amusing that the value of all 90s dot com IPOs were $44 billion. If that's accurate then it sounds like the dot com market as a whole was a bargain, because Google alone is worth >$700 billion and Amazon is worth >$500 billion.
Bubble or not, one obvious difference with cryptocurrencies is, it is not limited to a geography or a country. I hesitate to use the term “insurance” but the risk is spread across the globe. That plus the freedom to get into it (and leave) anytime makes it unique in a way.
Oh, but the naysayers in the media who have predicted bitcoin's collapse every month for years and have been wrong every time are of course given a free pass and are allowed to say "this time it's different" once again.
At the moment it feels like a parent warning a child - at some point you have to decide to step back and let them learn the painful lesson for themselves
Calculating a P/E on transaction fees seems silly because frees on a crypto currency aren't related to the amount of value moved they are related to the number of bytes of space your transaction takes which in a simple transaction is most effected by the number of source and destination addresses used in the transaction.
A better way to calculate this fake P/E ratio would be to look at the total USD volume of Bitcoin transactions and take 2% of that as the "earnings" logic being that if a coin were a credit card like company their earnings would be 2% of thier transaction volume. Still a bit of a contrived metric but at least related to the economic activity taking place.
> Take dot-com stocks, which were the biggest bubble of the past few decades, and likely the largest in stock market history. At the height of the dot-com stock bubble, the technology-heavy Nasdaq stock index had a price-to-earnings ratio of 175. In the past year, bitcoins have generated transaction fees of nearly $219 million. And at $9,600 a piece, the total value of all bitcoins -- their market cap -- now tops $155 billion. That gives bitcoins the equivalent of a trailing P/E ratio of 708.
What kind of logic is that? Holding bitcoin doesn't give you any earnings. In fact, you need to spend electricity and equipment if you want to collect those fees.
Holding 1 Bitcoin will give you 1 Bitcoin after 1 year.
You are confusing the unit you are holding with the value "vs" another unit. That depends on the market and the external factors (like inflation, interest rates, etc...)
But holding 1 Unit will always give you 1 Unit of whatever you are holding.
Yes, you have the same amount but no it doesn't purchase as much as it did one year ago. Units of accounting only make sense within a context of other units of account.
A dollar by itself is just a piece of paper if you cannot buy an amount of wheat, water or square meters with it.
And by that measure the dollar is losing value vs a bitcoin.
I think I misunderstood the intention for your first comment, probably by interpreting it in the context of another comment that was nearby but not related at all. Sorry
The news media have posted stories predicting Bitcoin's collapse pretty much every month since 2012... but I'm glad that once again they're sharing some morsels of their expert insight with us peons on why Bitcoin is overvalued.
Attempting price/earnings analysis here is not sensible, because bitcoin is not a stock: simply owning some doesn't earn you any "dividends" (mining rewards).
A better parallel is gold, which is a store of value that produces nothing of value for its owners, but is valuable because the supply is limited and there's a collective belief that this shiny metal is worth much more than its practical uses.
Bitcoin is going up because of those same properties. If supply ever becomes unlimited (say, there's a critical bug found), or its investors lose faith, it will crash.
For the Casper update of Ethereum with proof of stake, this may turn into a useful metric. You can use your ETH to participate in the PoS lottery and thus earn ETH (a kind of dividend).
Ultimately this will come down to what value Bitcoin really has to society.
An investment is when you work to receive something you don't want, but that you think other people will want in the future so that you can exchange it for things you do want. If you work for money then you do investment. By working for money you are betting that when you need food at the end of the week the shopkeeper will take your money.
Investing in other things is no different. You make a bet that people in the future will want to trade the thing you buy for things that you want at that point. For example, you could buy a small amount of gold every month and when you are ready to retire buy an annuity with the gold. That's if anyone actually wants the gold in 30 year's time. If they don't then you'll have to eat the gold.
People often say that cash is a bad investment, but actually it's really great as long as you plan to spend it soon. What they mean is it's not a good long term investment, of course. But cash stays valuable because unlike other things you can exchange it for things you want almost immediately. Bitcoin is now not like cash because of the high transaction fees. So it now competes with things like gold. So you have to ask yourself: what do you think will still be valuable in 10, 20, 30 years time? Gold? Bitcoin? If Bitcoin isn't a yes for enough people, then it's a bubble.
I think you are making a mistake by only looking at cryptos as "coins".
There are businesses being run on and around public blockchains and the cryptoeconomic incentives will ensure the perpetuation of the network. As long as there is value in maintaining public blockchains, their tokens (BTC, BCH, ETH, etc) will hold monetary value.
Was the collapse of the German Deutsche Mark, the Zimbabwean Dollar, the Venezuelan Bollivar a bubble too? Good money drives bad money out, so I’d argue that no, Bitcoin’s price is not a bubble. Clearly there’s no price that bitcoin holders will sell at so they’re clearly exiting the USD ecosystem.
I think the logical fallacy that’s occuring right now with critics of bitcoin’s price rise is that all bubbles has dramatic price rises (Pets.com, endless bullshit dot com IPOs, housing bubble) but not all dramatic price rises are bubbles (currency collapses)
Because bitcoin is measurable scarcity one can provable show it’s a good store of wealth.
OTOH, the ICO binge is an apt analogy for the IPO craze of the 90s. Investors are buying up securities with no viable business model expecting returns which isn’t going to happen on software that anyone can copy and run themselves. It doesn’t take a $200 million raise for a few engineers to build an MVP. It does take $200 million to run a successful Ponzi scheme (ICOs are probably not scarce and are therefore improper stores of wealth)
I think you may have this backwards. Your example currencies all tanked against USD. BTC is appreciating, heavily, against USD.
> so they’re clearly exiting the USD ecosystem
Sorry, are you suggesting that there's currently a run on USD? Because I'm pretty sure there isn't.
What you have here is pretty standard speculation in the price of BTC. I don't think you can read a lot more into it.
> Because bitcoin is measurable scarcity one can provable show it’s a good store of wealth
One can't, provably, do anything of the sort. It might prove to be a good store of wealth but neither its scarcity nor its current price gymnastics are indicators one way or the other.
>> Because bitcoin is measurable scarcity one can provable show it’s a good store of wealth
One can't, provably, do anything of the sort.
You don't understand how Bitcoin and Proof of Work works. The block hash in the following block is a measure of how scarce or rare it was to produce the bitcoins that were minted in this block:
https://insight.bitpay.com/block/0000000000000000002c8fe4629...
If you don't understand how scarcity works in a blockchain, the rest of your points are pretty suspect.
>Your example currencies all tanked against USD. BTC is appreciating, heavily, against USD.
Yes currencies have tanked against each all throughout history, whichever is the weakest tanks the first. Quantitative easing and other forms of inflation executed by the Federal Reserve.
>are you suggesting that there's currently a run on USD? Because I'm pretty sure there isn't.
Yes literally this is what the BTCUSD price plot is showing you. Wake up. the ZWDUSD looks the same. People dump bad money. They are dumping USD for something that doesn't inflate away their value.
If you think that scarcity is sufficient to prove that something is a good store of wealth, I have some paintings, that my children did, that I'm happy to sell you. Hint, you probably don't want them.
> Yes literally this is what the BTCUSD price plot is showing you. the ZWDUSD looks the same.
So you're equating the current performance of USD with ZWD? Wow, ok. I've changed my mind. I'm more than happy to sell you those pictures in exchange for just a few thousand of those worthless US dollars.
I find this an incredible shame. Bitcoin is a very interesting experiment and we have learnt a lot. It's by no means perfect but the major limitations are fairly easy to see and, I think, could have been rectified. I have a horrible feeling that the ignorance that seems to have surrounded it will not only kill it but make the whole idea toxic.
>If you think that scarcity is sufficient to prove that something is a good store of wealth, I have some paintings, that my children did, that I'm happy to sell you.
Scarcity is literally the only thing that makes goods valuable in a capitalist society. This is basic econ 101. Gold is more valuable than air because it is scarce and hard to produce (mining is the only way to generate it). If you think that an entity, that your children can at their will generate in any quantity is scarce, it means you're confusing uniqueness and scarcity.
If you're certain that bitcoin is doomed to fail, you certainly should be shorting it or selling calls / buying puts above spot price. Are you? You're a fraudster if you advocate a position for which you have no downside exposure in case you're wrong (Doctors who advocate patients to take drugs they haven't assessed the side effects are morally bankrupt).
Have you ever lived in a county that went through hyperinflation and had to use the USD to stabilize prices? It's because it was the best alternative to a high inflation currency. The USD dollar drove bad money out because it was relatively good to their alternative. Now people have a better alternative to the USD, so they are dumping it for something that is relatively good/better to their alternative.
> Clearly there’s no price that bitcoin holders will sell at so they’re clearly exiting the USD ecosystem
This may be true for some idealists, but most people view Bitcoin as an investment and haven't "exited" the USD ecosystem anymore than if they'd bought shares or bonds.
Network effect - same thing for Facebook. The more valuable bitcoin is the more secure and more resilient. Thus purely by price appreciation bitcoin is doing hiperbitcoinization - once people realize that fundamental value of fiat currency is a myth, more fiat currencies will collapse
Anyone can fork the codebase, or even the blockchain, or one of the many other blockchains out there. There is absolutely nothing provable about BTC as a store of wealth.
The amount of leaves produced by the cherry tree in my back garden during its expected lifetime is limited too, that doesn't make them a provable store of wealth.
>Anyone can fork the codebase, or even the blockchain, or one of the many other blockchains out there. There is absolutely nothing provable about BTC as a store of wealth.
Let's rewrite the above as follows:
>Anyone can copy Facebook's model, or even its code, or one of the many other social networks out there. There is absolutely nothing provable about facebook as a good social network.
>> >Anyone can copy Facebook's model, or even its code, or one of the many other social networks out there. There is absolutely nothing provable about facebook as a good social network.
That's a false analogy. You can rewrite it that way if you like, but it doesn't actually show anything.
The OP claimed that "one can provable show it’s a good store of wealth."
That's more akin to saying that facebook will provably continue to be the top social network. You can't prove that, and much like with cryptocurrencies it depends on what else comes along, how facebook continues to perform and whether people lose interest in the whole area of social networking (or cryptocurrency).
BTC has been around a few years. Saying "It has scarcity therefore I can prove it's a good store of wealth" is bollocks, sorry. Lots of things have scarcity.
I see what you mean, let me take back my previous comment, which was typed hastily.
I actually agree with you on the most part, you really can't prove that Bitcoin is a good store of wealth.
I am making an educated guess that a cryptographically secure way to transfer value for very cheap is probably here to stay, but it's far from provable.
In fact, if it were provable, it would become a very crowded trade and the returns would drop to zero immediately. The fact that it's unknown allows for potential greater returns (and greater losses if people who agree with me are wrong).
If Facebook had quit providing any sort of value to the people, had quit providing incentive to store their valuable assets like photos, videos, opinions etc. on their system, then yes, I think if someone copied Facebook %100 and started operating it properly, they'd be a good social network.
Facebook is not just a code or just a network.
ICQ had a network. MSN Messenger had a network. Heck Google actually has a network.
But without providing value, a network is not worth a thing.
I just went out after a long time. Banks are coming in and i don't trust them. They are smarter then me. I took out my profits and i'm doing stocks since a 1/2th year, i'm focusing on that now.
Here my reasoning:
1) BTC takes too long to make a transaction ( 2,5 hours) which make me kinda doubt the use case.
2) the enterprise is adopting the blockchain, which is irrelevant to bitcoin. If they would do crypto, they will create their own coin.
3) the guy further in the street is also buying crypto ( not in IT). Which for me, is a sign of a bubble. He knows nothing about the tech. It won't ever be used for the original porpose at this valuation.
5) The HODL meme is currently blocking the bubble to burst. Some people are willing to HODL even when 75% fades away. PS. Banks won't adopt the HODL meme :)
I have second doubts though, it truelly is an amazing tech.
P/E is a nonsensical measure for currency and assets. No one holding BTC expects to earn transaction fees. The miners get those fees. If we're talking about market cap of the miners themselves then this would be useful. Otherwise, the value of BTC should go up the smaller the transaction fees become. Why? Because less value is lost in transmission.
My only resentment toward Bitcoin is that if I had gotten in early enough there could have been some easy money to be made, but only because I believe in the Greater Fools theory, not because I actually believe in Bitcoin as a currency.
I never believed bitcoin as a currency same way I don't believe gold or art as a currency.
But bitcoin for me is something like art or gold (scarce, durable) easily, securely transferable to anyone on the planet within less than a day without the need for any third party.
Is price compared to transaction fees really a good measure?
Holding them doesn't mean you get the transaction fees, and increasing transaction fees would lower the 'P/E' but make bitcoins obviously worse to have or use.
AFAICT transaction fees aren't the reason someone "invests" or buys bitcoin, if you buy bitcoin you don't get a fraction of those fees. If you want that you should invest in mining, so I think the initial part of the analysis is flawled.
The second part looks like nothing to say, backed by a lot of non sensical numbers, but I'm not a native english speaker and also generally don't read nor like economic "analysis", so I may be wrong
This article seems to be making the assumption that price-to-rent, price-to-earnings and price-to-transaction-fees ratios should all naturally converge to the same amount.
I don't see any plausible justification for this assumption, in fact it seems like it is trivially disproved. The US dollar has no transaction fees, so it's price-to-transaction-fee ratio is infinite. This whole article is based on a false premise.
> bitcoins have generated transaction fees of nearly $219 million. And at $9,600 a piece, the total value of all bitcoins -- their market cap -- now tops $155 billion. That gives bitcoins the equivalent of a trailing P/E ratio of 708.
Absurdly idiotic analogy, as holding the underlying is in no way related to the revenues that miners earn.
If you go to bitcoinity and check the price of bitcoin, the first exchange they list is bitfinex. The price they list is in USD. That’s actually wrong. There are no dollars on bitfinex. They use a currency called tethers which they claim is backed 1-1 by dollars but almost certainly isn’t. They’ve created close to a billion dollars worth of that token during this run up.
Rumor has it that they’re using those tethers to buy btc on their own exchange and manipulate the price.
Once people realize those tethers are worthless and they can’t withdraw dollars, they’ll start using them to buy btc at any price and withdraw them on the exchange causing a massive run up in btc price as they make a run on the bank. It’s not really an increase in btc price but hyperinflation of tethers.
it would probably be a much bigger run up if they did > From what i have heard anyway the best way to do that through bitcoin is to pay someone to mine it.
VC-like money? The risk/reward schedule on bitcoin is not that far out of ordinary when compared to market conditions on "comparable" investments. For some generous definition of comparable.
Dot-com bubble lost $1.7 trillion when it popped. All cryptocurrencies combined are like $300 billion, and they will definitely not go to zero if/when it pops.
People should not see cryptocrruencies as a stock market, you should not expect any ROI, it's not a placement.
Cryptocrruencies (for me) are meant to be used, exchanged, a good metric to value a cryptocrruencie should be the 'cash flow (? exchange of money per unit of time)'.
Bitcoin is actually inefficient with its high transaction fees.
Transaction fees are about $5-7 USD right now, which for transactions over $200 makes it cheaper than using a credit card, and definitely cheaper than a wire.
41 points 109 comments as of writing one hour after publishing. Look like bitcoin advocates have specifically vetoed this publication.
This is probably one of the only the downside of crowd moderation. This would be an interesting phenomenon to investigate if someone have access to HN logs.
This is obviously wrong because holding gold doesn't entitle the bearer to a portion of those mining costs, same with Bitcoin.
The reality is that gold cannot be objectively valued because it doesn't have an objective value (beyond its industrial use, which accounts for less than 10% of its actual current price).
As a society, we collectively agree that gold is worth something because we agree that it is worth something.
With Bitcoin, we are doing the same. But if we had centuries to consolidate our appreciation of gold, we are compressing price discovery for Bitcoin in just a few years.
Interestingly, Bitcoin offers several improvements over gold (being digital, lightweight, cheap to move, proven limited supply). It also has drawbacks.
Lastly: the author's contention that you can take value away from Bitcoin by just copying its code is misguided. It would be akin to saying that you can replicate Facebook's valuation by copying its codebase. Facebook's value comes from its network. The same happens with Bitcoin, since its fundamental properties (censorship-resistance, security) are functions of network size and node-dispersion.