> I… don’t really see how Buffet’s purchases in ‘98 bear on the discussion at hand? You can read his 2011 investor note and see what his definition is about. I don’t know if he classified silver as productive or unproductive at that time.
It's relevant because Buffett is prone to talking his book, and while he does walk the talk about fundamentals/cashflow in general, he almost certainly did not make these comments out of some deeply-held principle (he obviously would not have said these things in 1998). He is not actually the kindly grandpa image he is careful to cultivate and his comments are usually calculated. The context in 2011 was discomfort with the new QE policies and concerns about inflation. Buffett was not really concerned with "greater fool" assets in a moral sense so much as convincing his investors that (1) sitting around and hoping for gold to act as an inflation hedge (2) in the case inflation actually manifested was plainly inferior to just owning cashflows that would scale with the value of the dollar anyway.
(He was right, obviously)
> So for $1B of transactions in a year you might only need $1M of currency
I think that's an insane estimate. That's a money velocity of around 300. The US dollar typically has a velocity between 1 and 2. Nor is $1B in transactions anywhere near the reality for dark web activity.
Still, I tend to agree that illegal use cases limited to just ransomware and buying and selling drugs online, while not necessarily a "small" scope of activity, would probably support a fair price only in the hundreds of dollars.
But it's honestly probably graduated to more utility as a potent money laundering tool now that it is broadly recognized and in some ways "legit" in the eyes of regulators. It's just so easy for someone with dirty cash to buy coins and claim they mined them in 2010 and just now discovered the dusty old drive in a desk drawer. It's next to impossible to disprove or prosecute, and best of all it means you only pay capital gains (as opposed to ordinary income, which would be the case for money washed through a cash business). I don't doubt that kind of activity supports a price in the thousands, at a minimum... the UN estimates 2-5% of global GDP is laundered money.
As someone else observed in this thread, the main "value creation" of the fine art market is similarly money laundering and tax avoidance, which is the primary driver behind the facially ridiculous payouts for individual works at auction rather than "artistic passion" or whatever.
What is interesting about all this, though, is that if the speculative value evaporated such that the illegal activity was all that supported bitcoin, it would seem almost certain that regulators would bring down the hammer (at least to the extent that it would not be useful for laundering money anymore), which makes the "intrinsic value" kind of hazy in an ultra-bearish scenario.
Not that I think the speculative value is likely to evaporate entirely... this isn't the first crypto winter by any means, and historically speaking it's right on time (halfway between block halvings).