Scarcity and utility

In economics, something has value if it checks the following two boxes: scarcity and utility. Scarcity just means that something has a finite supply. In the case of bitcoin, the cryptocurrency has a set cap of 21 million bitcoins.

Many analysts note that this set cap makes bitcoin more desirable than other assets, even gold. That's because unlike with gold, there's no need to worry about a digital Gold Rush. A treasure trove of bitcoin won't ever be "discovered," causing the crypto's price to crash with an influx in supply.

"There are potentially millions of times more gold underground than actually has been extracted," said Tom Lee, head of research at Fundstrat Global Advisors. Lee was chief equity strategist at J.P. Morgan before co-founding Fundstrat in 2014.

Ben Yu, a blockchain expert living in San Francisco, says technological advances are also making gold easier to mine.

"Today we mine gold at four times the rate that we did just 100 years ago," Yu said.

So if bitcoin has scarcity, what about its utility?

As bitcoin's price plunges, skeptics say the cryptocurrency has no value. Here's why they're wrong