Speculation v. Value Investing

A common question in the cryptocurrency market is how much of a coin's value is rooted in real utility and how much is mere speculation. To determine the answer, one must define what speculative value is and what material value is.

Speculative Value: Value based on the fact that an equity has been increasing in value

Material Value: Value based on goods or services for which an equity is interchangeable.

There is a widespread fear that the whole cryptocurrency market is a huge bubble of speculative value with no material value to support it. It is my point of view that most coins are pure speculative value, but a few easily identifiable coins are backed more in material value.

In some other posts, I'll talk about which coins they are, but right now I'll talk about how to identify them.

1. The coin is designed for a specific pre-existing market (cloud storage, sharing content, computing power).

2. Of all coins designed for that specific market, this coin is the most developed and most widely used.

3. Decentralization can do something for this specific market that existing centralized corporations cannot.

If all three points are true of a particular coin, then it is backed in at least some material value, so it will retain value even if speculative interest in the cryptocurrency market wanes.