Neither fiat nor crypto value is determined by the various economics-only theories and theoreticians. Citing one or the other is like arguing only the rich get rich by hard work or luck exclusively and only the poor are poor because of laziness or bad luck only.
Crypto enthusiasts and the more nonsensical “Austrian School” econs are the worst offenders, as they seem to be crossing the lines most in announcing their beliefs most apodictically.
What is at the core of the value of fiat is primarily trust and utility and secondarily supply and demand. For crypto, this is actually reversed.
Fiat value rests most of all on political transparency and good economic management. It relies secondarily on utility and, in this respect, its usefulness in the greatness number of transaction types and volumes and the ability to transact trans-nationally. The USD, EU and SF are good examples of these.
Crypto value relies almost entirely on its utility and increasing demand. The utility and demand derive currently overwhelmingly from its use for illegal activities: money laundering, sales of drugs, weapons, “blood” resources, extortion payments, etc. The next largest and rapidly rising use of crypto is speculation. As the ease and knowledge of use become more widespread in these sectors, the greater and perhaps more stable its value becomes. Its utility is therefore a function of the increase in such usages. Trust is rendered a basic mechanical role that only requires the system to consistently and invariably render transactions.
Ultimately, the attraction for crypto is predicated on the belief that governmental transparency, low corruption and good economic management is something unworthy of value. It is better to choose an amoral actor to mediate value. This is really the core of the debate. Bad actor and poorly managed states and well-run transparent democracies are the same for most crypto believers.
Currently, the dollar is in some sense the biggest loser in a scenario where crypto actually becomes more broadly useful. The dollar represents the (now somewhat in question with current U.S. leadership) leader of liberal western democracy as a system. Bad actor states are largely left alone and, even if their national currencies are undermined, the largest users of crypto are those running or benefiting from the political opaqueness and mismanagement.
The unequivocal beneficiaries of such an evolving state of things are the autocratic states of the world which can easily internally shutdown and criminalize “decentralized” systems such as Bitcoin, ETH, etc. and at the same time introduce their own crypto/blockchain based payments or secondary currencies.
In case it needs pointing out, the issues around decentralized currencies (whatever mechanisms they us PoW, PoS, PoR, etc.) are not economic. They are political and social. The whole classic versus Austrian economics debate over crypto is either a diversion or sign of little sophistication in understanding human institutions and history. Or both.
Those who believe in good government and democracy understand that having and keeping these is hard and ever ongoing work. Those who believe in economic theories or just their own opportunities without examining their likely effects will almost certainly take the world to a much worse and worsening place.
