Crypto Investing #69 – Where Does The Value Of Bitcoin & Cryptocurrencies Come From?

Tai Zen: What’s up guys. This is Tai Zen. With me today in Atlanta, Georgia we got, the great oracle of cryptocurrency.

In this video today, we want to talk about some bullshit myths in the cryptocurrency world.

If you are a crypto cryptocurrency investor, you need to understand this concept of the value and where bitcoin and any cryptocurrency gets its value from.

There’s a lot of people ask where Bitcoins or any cryptocurrencies value comes from intrinsic. They also say that it has no intrinsic value or there’s no government backing, so why it would be valuable.

First of all, it doesn’t need any back. A currency works because people agree that it works, not because somebody backs it.

If you would like to believe USD has value because it has the US government backing it, that’s fine. You’re welcome to believe that. There’s nothing wrong with that. However, that doesn’t mean it has to be backed by anything to have value.

For example, gold. What back gold? Nothing.

Gold has value because we humans mine it out of the ground, melt it down and use it for jewelry and mainly for commercial reasons. That’s why it has value.

Now, all that aside, whether you believe that or not, it doesn’t matter.

If you want to make some money from cryptocurrency investing, you have to see where the value is in the cryptocurrency and not just be sucked in by all these naysayers that don’t understand how value is created in cryptocurrencies.

I’m going to let the explain to you how to understand the value in Bitcoins and cryptocurrencies and why it’s worth the risk.

Leon Fu: I wrote a blog post today and when people ask where the value comes from, we go back to our good friend, Charles.

Tai Zen: Charles Hoskinson, the former co-founder Ethereum, not the CEO of the Ethereum.

Leon Fu: He made this statement that I go back to it because this doesn’t just apply to cryptocurrencies. It’s actually with any investment.

He said the value of all the cryptocurrencies comes from its community, not the technology.

Tai Zen: Agreed.

Leon Fu: In other words, when people cryptocurrency has no intrinsic value and it’s not backed by anybody, they’re wrong. It is actually backed by something. It’s backed by its community.

Tai Zen: Explain to the audience what constitutes the community.

Leon Fu: The community includes developers, programmers, and people that are involved in Bitcoin in some way, even people like us

Tai Zen: if you talk about it, you’re a part of the community.

Leon Fu: if you’re involved in it anyway, you are part of the community.

Tai Zen: Even you just talk about how you like it or how you don’t like it. Or you talk about whether it is a scam or not.

 Leon Fu: All the value that we have as a human being comes from another human being. that is what value is.

Tai Zen: if I say that the value of Bitcoins or cryptocurrencies comes from its technology, you will disagree with that?

Leon Fu: Totally disagree. We have 700 different altcoins and most of them are worth nothing. Most of them came from Bitcoin. They used identical technology because I can copy and paste the code.

However, you cannot copy and paste people. Therefore, the human is the factor that gives Bitcoin value.

Tai Zen: Let’s give us some examples of something that looks like a business on the surface, but it’s actually the community.

Leon Fu: Let’s take stock. Stock is like a token. It’s a token of ownership for that company.

Many people will argue it’s the profits that give the stock its value.

Tai Zen: But a company like Amazon never make profits.

Leon Fu: Many companies have never made profits.

Uber is now $70,000,000,000. It has never made a profit and it keeps going up.

Many companies have never made a penny in their entire existence and they got bought out eventually.

Because even though they make no money, they still keep getting more money from investors.

Tai Zen: Maybe this is a good time where we share the story about one of our team members and his cologne business. Let’s just call him the accountant because we don’t want to use his real name.

When he was in college and goofing around after Al Gore invented the Internet, he built some goofball websites just for fun and to see what a website was.

Later on, after he finished college, he went to Dubai, India and other countries. He realized that there was a need for colognes and perfumes because he was a big cologne and perfume fan.

Then, he came back to the US and noticed that the kiosks inside the malls always ran out of colognes and perfumes because they were too small to buy a whole truckload full of bottles of cologne.

What the accountant did was he figured out a way to get these pallets full of colognes. Then, he set up a rinky-dink website and started selling these cologne bottles to all the kiosks where they can buy a bigger batch.

In other words, they can buy like 100 bottles at a time and don’t have to buy a whole truckload. Then, his business exploded in a very short period of time.

After that, a bigger cologne and perfume company distributor offered him $500,000 for the cologne and perfume distribution website that he had set up.

He was all excited about it, so he and his business partner immediately agreed to sell it for that price. However, when that company got his website, they sold it to the bigger company.

After he sold it, he noticed that they were shutting down the website and starting to slow the traffic down and all the business down. He couldn’t figure out why they did not care about the business.

What he realized very quickly after they shut down his website was they bought it to acquire all his customers.

In the world of business, that’s called a customer acquisition purchase. It was much cheaper for that bigger company to have those new customers instead of spending millions of dollars to do the marketing.

Is that what you were saying about companies like Snapchat and things like that?

Leon Fu: This happens in silicon valley all the time where you got all these startups that fail.

Yahoo is very famous for this. Those are called acqui-hirers where they did the same thing as the bigger did in our member’s story. They just buy that company and shut it down.

In that case, their target may not be the users or customers. The target is the employees.

Tai Zen: The employees might have talent.

Leon Fu: It’s a talent acquisition because the recruitment is going to cost them.

The reason they do that is there’s a shortage of software engineer, so they can’t get these engineers at any price.

Tai Zen: When we did the privacy coin research, we came across Shadow Cash and Dash.

There was a time that Dash was trying to buy out and merged with Shadow Cash to acquire the engineers and the developers. However, it didn’t go well because…

Leon Fu: I don’t think they gave him a good deal.

Tai Zen: …they were not happy with the offers.

Leon Fu: So this happens all the time.

It’s very well known that there’s a shortage of talent in silicon valley, which leads to the fact that a bigger company usually look for a smaller company to buy.

I call it a signing bonus because they’re buying the company for the people in it, not for whatever the company is doing.

Overall, the point is the community is more important. Plus, the profits come from the community.

Your customers have value. Your employees have value. Any kind of intellectual property patents that all has value.

Tai Zen: Even reporters, journalists and people that talk about it have value.

Leon Fu: You can see these companies buying up companies all the time.

The point I’m trying to make is you have to look at the community to evaluate the investment profession, not whether it has this “intrinsic value”, which is really hard to define what that is, or profits.

Tai Zen: Let’s say you have software that has 10 million people using it. People in Wall Street can see the value in that immediately even if it’s not making money.

Leon Fu: Even if you have a company like Uber is losing hundreds of millions and billions a year, they instantly recognized this is valuable even though it’s not profitable.

It might never be profitable…

Tai Zen: …like Amazon

Leon Fu: Yeah. Amazon lost money for like 20 years.

What I’m trying to point out is you do need to succeed as an investment in your community has to grow.

Tai Zen: Like Wikipedia. Does that make money?

Leon Fu: No, they got donations.

Tai Zen: They get donations, but they’re extremely valuable website.

Leon Fu: That’s right. They’re a nonprofit by definition. They shouldn’t be making money.

The value of investing is you want the community to grow and become more valuable.

Profit is just one measure. In fact, it’s a very narrow measure because it’s all just revenue minus profit expenses. That’s all profit is

Tai Zen: From a cryptocurrency investing perspective, the viewers are wondering why this relates to making money.

When you look at a potential cryptocurrency opportunity, you should be asking yourself whether this team build a community around their idea.

Now there are many ways to build a community. For example, we are in the tech business so we tend to build the community around technology that uses that technology such as a ride-sharing app.

You’ve got drivers. You got customers who ride. You got the software engineers who develop. That’s a community.

The reason Uber is so valuable is its community has exploded all over the world now. Even though they lose money, that does not mean they don’t have value.

It’s the same thing with cryptocurrency investing. You’ve got to look at the team and their idea. Then, you have to think to yourself whether they build a community around this.

The most frequent ways are to have new technology, a new idea, and a new app.

Look at Dogecoin. They build a community around a dog meme and it’s worth $30 million just because people like it. If you got in early enough, you would have made lots of money.

However, you have to ask yourself whether that is sustainable and how far that is going to scale.

Tai Zen: It’s not going to scale very far.

Leon Fu: It still scales further than anyone thought. That’s why I’m saying you never really know.

There are many different ways to build a community because the community is the investors, traders, users, developers or business partnerships. All of those things count. In fact, that’s what really matters in the end.

Leon Fu: The point is you have to ask the team whether they build a community around what they’re trying to do. That is the punch line of this video here.

Tai Zen: To quickly summarize it, the reason why we made this video and talked about the community is one of the key factors that we look at when we’re researching a cryptocurrency to put money into it is whether or not they have a strong community.

Leon Fu: Or do they know how to build a community?

Tai Zen: Thanks for watching this video.

It was an honor to have the oracle of cryptocurrency here with us today. He is not world-renowned for driving. I can vouch for that.

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I will look forward to seeing you in the next video.


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