The concept of investing in cryptocurrency can be difficult to wrestle with for more traditional investors. People often criticize their lack of intrinsic value, the fact that they're intangible, and their speculative pricing. 

But instead of trying to value cryptocurrencies like we do stocks, it can help to think of them more like commodities. Physical commodities like gold, oil, and timber are priced relative to supply and demand. When we begin to approach the valuation of cryptocurrencies from this viewpoint, there is one in particular that meets many of the criteria of a traditional commodity: Bitcoin (BTC -1.33%). 

Considering Bitcoin a commodity might be a novel concept. How could it be a commodity if it isn't representative of a tangible asset and doesn't provide any real use cases? However, when we take a look under the hood, it becomes apparent that Bitcoin's price could actually be representative of more than mere speculation. 

The only Bitcoin metric that matters

Before getting into supply and demand, we need to analyze why there even is demand for Bitcoin. Most advocates claim that Bitcoin's primary use case is derived from its scarcity, which ensures that there will only ever be 21 million Bitcoins in circulation. While this is a crucial aspect of Bitcoin's usefulness, there is another layer to its intrinsic value. 

Meet the hash rate, which measures the computational power of a blockchain. Higher hash rates lead to an increase in mining difficulty. The greater the mining difficulty, the greater the level of security and decentralization. It's those two characteristics which set Bitcoin apart from any other blockchain. 

Evaluating a blockchain's overall hash rate helps to gauge the decentralization and security of a network. As a blockchain becomes more decentralized and secure, it ensures that decision making and control don't rest in the hands of select groups or individuals. 

Bitcoin's hash rate is the highest among any other blockchain, and has been continuously rising since it was created as more miners and more powerful computers joined the network. It recently hit an all-time high on Jan. 25.

From this angle, it becomes more evident that there actually is something tangible about Bitcoin's price. In this sense, Bitcoin's hash rate serves as a gauge to measure its ability to store value in a decentralized and secure fashion. 

Scarce supply meets massive demand

To truly measure Bitcoin as a commodity, there also needs to be quantifiable demand for a limited supply. As previously mentioned, Bitcoin's code is hardwired to ensure that there will only ever be 21 million Bitcoins in circulation. Today there are around 19.25 million in circulation, and the remaining 1.75 million will enter the pool at a dwindling rate until the last Bitcoin is mined in 2140. 

Fortunately, capturing demand is also easy. Because blockchains are open source and transparent, data on blockchains are public, so we can measure demand in a variety of ways. 

One of the simplest and most meaningful ways to do this is to evaluate the number of unique addresses on the blockchain. Although one person could theoretically have multiple addresses, the number of addresses can still serve as a proxy of demand and usage of a network. 

Similar to its hash rate, the number of Bitcoin addresses has increased steadily since the cryptocurrency's creation 14 years ago. Actually, that number has been more than just steady -- the rate at which new addresses have joined the network has risen massively. 

In Oct. 2015 there were only 100 million addresses on the Bitcoin blockchain. By July 2019 this number reached 500 million. Today it has blossomed to more than an astounding 1 billion addresses. This represents a compound annual growth rate (CAGR) of 342%.

The long-term case for Bitcoin

This combination of limited supply, increased demand, and measurable usability makes Bitcoin unlike any other cryptocurrency in existence. While new cryptocurrencies are seemingly created every day, none are able to offer investors a combination of true decentralization, top-tier security, near-exponential demand, and a finite supply. 

The price of Bitcoin is rooted in more than mere speculation. We must recognize that its price is actually a representation of demand to store value on the world's most powerful, decentralized, and secure network. 

While it might be difficult to wrestle with the fact that you can't hold a Bitcoin in your hand, intrinsic value is indeed present -- it just might require a shift in perception. As this concept becomes more widely accepted over the coming years and decades, it's likely that Bitcoin's price will become subject to the dynamics of supply and demand just like any other commodity.