Topic: bitcoin calculated (Read 1411 times)

Value of the btc is determined y a simple method......

You remember that mission of gta vice city "Supply And Demand"

That's it.....BTC Value calculated on the basis of supply and demand

The price of Bitcoin is an extremely volatile calculation that is made every second.

It works sort of like the stock market however, unlike stocks, no one knows what the actual price is, and no one will ever know. Let me explain.

The stock market is based off of supply and demand. That is, when there are more buyers in a stock, the price will most likely fluctuate upwards. However, when there are more sellers in a stock, the price will most likely fluctuate downwards. This is visible with every stock.

Bitcoin works the same way. Except stock exchanges/markets are open only from certain times on business days. Bitcoin exchanges are open 24/7 meaning you can trade, loan, etc. at any time.

Each of these markets calculate an AVERAGE price based on the highest popular price. As an example, if the sellers are very populous, the price will become their highest pay offer. Vice versa for the buyers. This is how prices climb and fall. Once you understand these basic principles, you can see other trends that take place in the market and even use them to your advantage.

That's how the price is calculated. Not too hard but the problem is that no one actually knows the real price. Every exchange has different users that trade on different levels. Thus, one exchange could be a couple of dollars lower or higher than the other. However, these can balance out when someone takes the prices of all different markets.

Like the price of anything the price of bitcoin depends on what people are willing to pay for it, the classic supply and demand, that is why when in some country things go wrong with the economy we see the value of bitcoin getting higher.

Thank for the advice.

Whether or not they are on an exchange and in the order book is not important because if the price is right, you would put them on the exchange and sell them at that price. Therefore, your coins are on the supply curve and they are part of the supply.

Just finished the article. Let's go this trough.
The supply is a curve. For every price there is an according quantity that the supplier supplies.
My point is that we can only pick one point on the curve, we can not have more than one point at a certain time. This point can change (shift or move) but can only be in one place at a time. This is what i mean by "supply and demand are bound to a price and time". So for every point in time there is a certain supply (by that i mean what you would call a quantity). So for every point in time there is a certain quantity of good that are for sale. If i'm a supplier and the price is to low for me to sell and i hold my good back for that reason than they are not part of the quantity for this particular moment and price. This is what i mean by saying that if i hold my Coins, they are not for sale now and therefor not part of the supply. And this is why i don't think that all existing coins are part of the supply unless everybody wants to sell his coins right now for the current price.
BTW I too think Danny is fine and i find him helpful often.

I'm Danny Hamilton.

I figured that would be obvious from by userID.
 


I'm more than 33 years old and less than 80 years old.

My exact specific age seems irrelevant.


I've been a computer programmer for the past 33 years.
I've been active in bitcoin discussions since 2012.
I read. A lot.


Thanks.  I try.

In Economics, the term "supply and demand" refers to two curves -- the "supply" curve and the "demand" curve. The axes of the curves are price and quantity. Where the two curves intersect is an equilibrium point, and it determines the price.

You refer to "supply" and  "demand" as if they are numbers, but they are curves.

Note that there can be a third axis: time. Over time, the supply and demand curves can change. The changes to the supply and demand curves result in movement of the equilibrium point, and thus changes in the price over time.

Here is an Investopedia explanation with a lot more detail: Economics Basics: Supply and Demand

Now, there is another "supply", which seems to cause a lot of confusion. It is the "money supply". That is the total number of bitcoins that can be spent.  It is a number and it is not the same as the "supply" in "supply and demand"; however, it is related. The coins in the supply curve make up the total number of spendable coins, which is the "money supply".

I hope this helps you understand what DannyHamilton wrote. FYI, I don't know who DannyHamilton is, how old (s)he is, or what kind of background (s)he has, but I can say that over the years (s)he has demonstrated to me a solid knowledge of both Bitcoin and Economics.

In my opinion Supply and demand are always bond to a price. What you describe would mean that all 16 million Bitcoins (minus timelocked once and the one with lost private key and such) are supply. By the same logic there is also a demand for all the Coins, as i would buy them all at the price of 0.01 cent per coin. So we have 100% demand and 100% supply. It makes more sense to me if we take a price and a certain time and say that for this price and time there is a certain supply and demand. And if someone is holding and the price is to low, then he is not part of the supply right now.

OK, sounds like you're right. I admit i was wrong on this one.

If we only look at financial incentives then my sentence is right. I will buy from the person (miner or not) who will offer the cheapest price. Miners however might be willing to mine at a higher cost and at a loss, if they think that that way they can force the competition out and earn later more.

Coins that are "locked away by holders" are still part of the supply.

Saying that coins are "locked away" by someone is just saying that the exchange rate (or "price") for those coins isn't high enough yet for those "holders" to sell.  That is true of EVERYONE that has a higher "sell" price on an orderbook than the current exchange price.  There is nothing special about "holders" that removes their coins from the supply side of supply-and-demand.  If the demand is high enough and the price is high enough, then those holders will eventually either sell or use their bitcoins.


You are correct that the market price and the cost of mining tend to be very close. However, you have the "cause" and "effect" backwards.  The market price doesn't orient itself on the cost of mining.  The cost of mining orients itself on the market price.  If some miners can't mine profitably at the current market price, then miners will tend to stop mining and the difficulty will drop, reducing the cost of mining for those that continued.  If the current market price is high enough to easily mine profitably, then more miners will tend to begin mining and the difficulty will increase, increasing the cost of mining for everyone.


Mining is just an indirect way to buy bitcoins.  You pay for electricity and hardware which you turn into bitcoins.  If it is cheaper to buy the bitcoins directly on a market, then there is no financial incentive to mine.  If it is cheaper to mine, then there is no financial incentive to buy on a market.  As such, miners are part of the demand and are effectively "buying" bitcoins while they are mining them. The current supply and the rate at which that supply increases is fixed regardless of what the miners are doing. Miners don't set the price, they follow it.

That is correct answer. Vaue of bitcoins are most trully free market in the world. Working every hour of every day every year.
There is no more real price discovery out there .

The best answer is still "supply and demand"
Now you can measure it with many metrics, like global spread/adoptance, number of new businesses linked to btc, number of ATMS, concurrence with other alts, internal and external politics, etc. Also keep in mind that halving every 4 years means that virtually Bitcoin has to double its value to keep the same profitability for miners, and that is if we don't take into account the difficulty increase.

The car example was maybe not perfect even with only new cars, but i still think they play a role. And since they are the one that produce the new coins and process the old (confirm transactions) i think we have an incentive to keep them alive. But maybe you are right (you do have a solid argument) and they play a much smaller roll then i think they do.

Miners as a group have little to no influence on the price given their small portion of the market supply. Why would 5% of the market determine the price for the other 95% of the market when there is no distinction between market participants?

The car market cannot be compared to bitcoins because miners produce the same number of bitcoins regardless of the price or profit, but car production (and thus supply) depends on price and profit. Furthermore, there is a difference between a new car and a used car, whereas there is no difference between a new bitcoin and a bitcoin mined 7 years ago.

I beg to differ. You are right that Bitcoin isn't something that gets used up and the number of newly mined coins is way lower then the total number of mined Bitcoins. More or less 1800 new coins a mined every day which is nothing compared to the 16 million Bitcoins that are already out there. Although a considerable amount of those coins is locked away by holders, the number of traded coins is still higher then the daily mined coins. Still we will look at the miners to find the right price. If you want to buy or sell coins then you will check the offer you got and compare it to the market price. The market price orients itselfs on the cost of mining. If you want to buy then you would not buy at a higher price then the miners are asking for as you don't want to overpay. Also a seller would not sell at a lower price then what miners ask for or he would pass an opportunity to make more money.
It is almost the same with cars. almost the same, because these will eventually get used up. This should also work if we only consider new cars. The number of cars that exist is bigger then the daily production and buying or selling one we always orient on the price the producer asks for. You wouldn't pay more and a dealer wouldn't want to sell for less.

The value is not "calculated", it is reported.

The price you see is generally the price of the last trade on some exchange somewhere. Sometimes, the reported price is an average of the prices reported by several exchanges. That's why you see different prices in different places.


That is a common fallacy. Bitcoins are not consumed, so the supply includes all bitcoins, not just the ones created in the last ten minutes.

Furthermore, the number of new bitcoins is a small fraction of the total trade volume, so it is difficult to claim that miners have much influence on the price.

The ETF denial had some comments on it. Free market rules don't completely apply, there are some uncanny factors kicking in.

I would like to add one more thing to the previous answers. Of course Demand and Supply is one main reason, but you should also have one thing in mind. The miners. They are mining or producing the Bitcoins and therefore the supply. They have costs they need to cover, so there goal is the sell the Bitcoins at a price where they can do this. Otherwise they would go out of business and the supply would go down, which in return would mean a higher price and miners would be able to start doing business again. Of course we don't see the miners going in and out all the time, so the price has the tendency to also be around the point where the wast majority of miners can work profitable.

The price of bitcoin will have calculated by the market movement and the result will be the average result by all of the prices on the bitcoin market.

Supply and Demand. It depends on what other people are selling it for and/or buying it for. Acts like a stock market of sorts.