Charles Edwards, a popular voice on all things crypto, argues that Bitcoin is giving investors a juicy 40% discount right now. He arrives at this conclusion through his Bitcoin Energy Value (BEV) model. He sets Bitcoin’s “intrinsic value” at $130,000, a number based on the energy it costs to mine the currency. Sounds enticing, right? Wrong. This seemingly simple analysis hides a really risky oversimplification, and here’s why you need to treat it with great caution.

Energy Cost Isn't The Whole Story

The BEV model supports the argument that Bitcoin mining is an egregious use of energy. As a result, all of this massive, wasteful energy consumption should raise its value. This is a little like claiming that a work of art is only worth as much as the canvas and paints it was created with. Nonsense. Value isn't solely derived from production costs. What about the artist's skill? The historical significance? The emotional impact? The same applies to Bitcoin.

Cumulatively ignoring these factors and reducing the conversation solely to energy cost is a bad approach. It’s like trying to pilot a ship with nothing but a compass, while ignoring all weather, currents, and the actual sea chart. You're heading for disaster.

  • Network Effects: The more people use Bitcoin, the more valuable it becomes. It's a social network, not just a commodity.
  • Adoption Rate: Is Bitcoin becoming more widely accepted by businesses and institutions? That's a far better indicator of future value.
  • Regulatory Risks: Government crackdowns or favorable regulations can drastically alter Bitcoin's price, regardless of energy consumption.
  • Technological Advancements: What if a new, more energy-efficient mining method emerges? Would that suddenly make Bitcoin worthless?
  • Scarcity: With a limited supply of 21 million Bitcoin, its value is inherently linked to its scarcity.

The BEV model — if accepted uncritically — could push us in dangerous directions and lead to environmental harm. Think about it: if the "intrinsic value" of Bitcoin is tied to energy consumption, miners are incentivized to find the cheapest energy sources, regardless of their environmental impact. We could see another explosion of coal and other polluting, energy-intensive global mineral supply chains. This would be a disastrous blow to our economy’s shift towards building a more sustainable future.

Cheap Energy, Expensive Consequences

Now try to picture a world where Bitcoin’s “value” is directly correlated with the pollution it creates. That’s not the future we want, and it’s a concrete possibility if we charge ahead without question on the BEV model. We are all too familiar with how proof-of-work can create harmful environmental incentives, and this model threatens to make it worse.

This brings me to another point. As the philosophical underpinnings of Bitcoin, the libertarian ethos that values decentralization and freedom from government oversight is widely recognized. We know from repeated experience that a completely unregulated and profit-driven system is dangerous and untenable. For instance, it may lead to greater environmental harms. A more nuanced approach, perhaps involving responsible regulation and incentives for sustainable mining practices, is crucial for Bitcoin's long-term viability.

True, Bitcoin has made a substantial rally as of late, breaking above its daily Simple Moving Averages (SMA) and enjoying some of its biggest daily gains in years. U.S. spot Bitcoin ETFs experienced record inflows, indicating a restored appetite. And yes, despite what you’re hearing in the news, it’s now trading around $94,000, up 11% weekly. But these are speculative market movements, reflecting bullish investor sentiment, not necessarily a true representation of Bitcoin’s supposed “intrinsic value.”

Don't Confuse Price With Inherent Worth

Remember the dot-com bubble? Companies with no sustainable revenue weren’t turning profits, but were trading at insane valuations just because everyone thought that they should be worth that much. The bubble eventually burst, and most of those investors were left with nothing. So, don’t let the current hype distract you from the very real risks that lie beneath.

Bitcoin, like any investment, carries inherent risks. It’s highly volatile, easy to manipulate and the industry currently operates in a regulatory grey area. Focusing on the BEV model alone to figure out intrinsic value can trick investors. Though it offers great opportunities, it is associated with serious threats that can negatively impact investment decisions.

Don't fall for the 40% "discount" trap. Check out these examples, do your own research, weigh all the pros and cons, and most importantly, make sure you understand the risks before investing. Your financial future depends on it.

Don't fall for the 40% "discount" trap. Do your own research, consider all the factors, and most importantly, understand the risks before investing. Your financial future depends on it.