The analysis here https://bitcointalksearch.org/topic/actual-bitcoin-fundamentals-and-market-cap-871596 goes in the same direction.
Most of the current price is speculation about the future expectation of the bitcoin fundamentals.
I don't particularly like the question because it's sort of irrelevant.
When I say "sort of irrelevant," I don't mean that individual opinion doesn't matter, but this is an auction market in which trading occurs across vastly different mediums. In this thread we've already seen personal valuations at ~200% current market rate, but this means nothing. The posters don't even believe in their personal valuations because nobody's partaking in the 50% off sale going on all day every day. There's money up for grabs at half-off and nobody's buying.
I just don't think it's the best interpretation to visualize the market as requiring some Universal price anchor or pricing mechanism, but rather value will be determined by localized factors as it has been. For example, certain factors make valuation on Bitstamp different from BTC-e, and certain factors also affect valuation of BTC traded on the chain vs. off the chain. The price of BTC on BTC-e is always lower because it's simply near impossible to directly fund your account with fiat. The price on Local Bitcoins is simply misleading because the spreads are ridiculous and the depth isn't there. The prices asserted in this thread are, at best, hearsay because nobody is trading at these prices.
When I say "sort of irrelevant," I don't mean that individual opinion doesn't matter, but this is an auction market in which trading occurs across vastly different mediums. In this thread we've already seen personal valuations at ~200% current market rate, but this means nothing. The posters don't even believe in their personal valuations because nobody's partaking in the 50% off sale going on all day every day. There's money up for grabs at half-off and nobody's buying.
I just don't think it's the best interpretation to visualize the market as requiring some Universal price anchor or pricing mechanism, but rather value will be determined by localized factors as it has been. For example, certain factors make valuation on Bitstamp different from BTC-e, and certain factors also affect valuation of BTC traded on the chain vs. off the chain. The price of BTC on BTC-e is always lower because it's simply near impossible to directly fund your account with fiat. The price on Local Bitcoins is simply misleading because the spreads are ridiculous and the depth isn't there. The prices asserted in this thread are, at best, hearsay because nobody is trading at these prices.
I also don't love the question, but for a slightly different reason. Markets are forward-looking, so basing a price on today's value doesn't really tell the story.
My valuation model for BTC involves looking at it as a percentage of M2 money supply. I know what I believe it will be worth in or around 2020 (probably less than many forumites think at around $2300-$2500) and I am buying now because, even at that price, a 6x return in less than 6 years is amazing.
But it's worth noting that, as with stock purchases, future earnings are "baked" into the price quite a bit. I'm not buying now because I believe the intrinsic value (based on M2) is all that high, but rather because I'm buying the equivalent to future earnings. Based on M2 calculations, I'd suspect the snapshot value TODAY using the model is more likely in the range of $20-50.
The other thing to remember is that price and value are different. Over time they converge, but there can be many divergences to the high side and to the low side. It's quite possible that if adoption is strong and use-cases are strong that the value in 2020 will be $2300, but foward-looking markets will set the price much higher. Or lower.
I really like your distinction about factoring future developments into the price. Out of curiosity, could you provide any more explanation as to how you arrived specifically at a $20-50 range?
The model I'm using is based on M2 money supply, which is cash, checking deposits (basically M1) and also savings deposits and money market funds. It does NOT include things like institutional money markets. I think M2 suits BTC the best because it accounts for use of BTC as a currency and also as a store of value.
Modeling out to 2020, I'm trying to calculate growth rates of non-mining-related transactions (this is not easy data to find) and I'm estimating what percentage of M2-type transactions will be done in BTC. Also trying to account for velocity increases, which decrease the required M2 money supply. I believe that BTC velocity is actually very low right now, but that it will increase. This view of current velocity is not popular, as most BTCers seem to think it is high, but I feel they are including mining.
So basically, BTC will constitute some percentage of the money supply by virtue of transactions and store of value, and whatever percentage of M2 is constituted by BTC, the capitalized value of BTC should equal that percentage of global M2.
As for right now, it is a wild ass guess based on what I THINK is happening. It's easier to project the data going forward than it is to root around in data stores right now, so I haven't been all that vigilant about doing it.
Sorry...I don't think I explained that very well. The short story is that I'm guessing about current value because. I think I have a better idea about where we are GOING (usage, velocity) than where we are.
