Why does crypto have value?

This question gets two unsatisfying answers. Sceptics say crypto has no value because it is not backed by anything. Advocates say it is digitally scarce and therefore valuable. Both are too quick.

Where value comes from generally

Nothing has value intrinsically. Gold is valuable because people want it — for jewellery, industry and as a store of value — not because valuable is a physical property of the metal. The pound or dollar in your pocket is not backed by gold either; it has value because a large economy accepts it, taxes are levied in it, and law requires its acceptance for debts.

So “not backed by anything” is a weaker criticism than it sounds, since most modern money is not backed by a commodity. The stronger version of the question is: what sustains people’s willingness to hold this?

The arguments that carry weight

Verifiable scarcity. Bitcoin’s 21 million cap is enforced by software every participant runs and can check. That is a genuinely novel property — digital things are normally trivial to copy. But scarcity alone is worth nothing; there are scarce things nobody wants. Scarcity only matters where demand already exists.

Utility. Ether is needed to use Ethereum — every transaction and contract call consumes gas paid in ETH. That produces real demand tied to actual usage. This argument is much stronger for chains with genuine activity than for tokens with none.

Censorship resistance. The ability to hold and move value that no government or bank can freeze has obvious worth to people under capital controls, in unstable currencies, or cut off from banking. This is not theoretical; it is the clearest real-world use.

Network effects. A monetary network becomes more useful as more people accept it. Bitcoin’s position owes a great deal to being first and to the accumulated infrastructure around it.

The arguments that do not hold up

“It is backed by mathematics.” Mathematics guarantees the rules are followed. It says nothing about whether anyone wants the result.

“It has to go up because supply is limited.” Fixed supply constrains inflation; it does not create demand. Plenty of fixed-supply assets have gone to zero.

“Institutions are buying, so it is validated.” Institutions buy things that later collapse. This is a statement about flows, not about value.

“The technology is revolutionary.” A technology can be genuinely useful while a particular token attached to it is worthless. These are separate questions, and conflating them is the most common error in token valuation.

The question to ask about any token

For most tokens, the decisive question is whether success of the project actually accrues value to the token. Many do not: the protocol may work beautifully while the token is a governance badge with no claim on revenue and no required role. In that case the token can fall even as usage grows.

Ask: what forces anyone to buy this token? If the honest answer is “nothing, they buy it hoping to sell higher”, you are looking at pure speculation. That is not automatically a reason to avoid it, but you should know that is what you are doing.

Where that leaves us

Crypto has value because enough people are willing to exchange other things for it, supported to varying degrees by scarcity, utility, censorship resistance and network effects. Those foundations are real but not guarantees, and they are far stronger for a handful of established networks than for the thousands of tokens that borrow their vocabulary.

Anyone telling you the answer is obvious — in either direction — is not thinking carefully.

What to read next

Next: is crypto safe? An honest answer.