Topic: Fundamental Analysis of BTC, is BTC overvalued? - page 3. (Read 14286 times)

The Federal Reserve does more than just “manipulate interest rates.”  If you think that’s all they do, you’re just demonstrating your ignorance about the subject.
http://en.wikipedia.org/wiki/Gross_domestic_product
Determining GDP
GDP can be determined in three ways, all of which should, in principle, give the same result. They are the product (or output) approach, the income approach, and the expenditure approach.
The most direct of the three is the product approach, which sums the outputs of every class of enterprise to arrive at the total.
. . .
You have a serious misunderstanding of economics and have repeatedly demonstrated your ignorance.  If you can not understand the basics, you disagree with reputable, verifiable facts, then there is no point in me explaining this to you.
There’s so many things wrong with your “challenge”.    “Tell me how exchanging my work for dollars creates dollars (or at least gives them value, somehow) while exchanging my work for bitcoins does not.” Is the complete OPPOSITE of what I said.  They both are the same thing, your value for a dollar is what you input to earn it, just like your value for a BTC is what you input to earn it.  SIMPLE.  What is so hard to understand about that?  Your “challenge” is easily explainable, but obviously you aren’t interested in understanding, only arguing.

wait producing a BTC costs only 28 cents a day?

I keep seeing a lot of miners talking about 1 BTC per day on average from the pools.  right now thats like 250 bucks a month with today's pricing.  their electric bills are only being affected $9/month in order to mine?

Monetary policy is how they manipulate interest rates, which is not the money supply.  You'd know that if you'd ever read the minutes of the FOMC meetings.  Go find out why Bernake is called "Helicopter Ben".

You might want to look into how GDP is actually calculated.  I'll give you a hint, production is not part of it, but spending is.  They could say that GDP is found by counting unicorns, but that doesn't change the math.  What they actually do is much more important than what they say they do.

Once again, you've done an excellent job dodging my direct challenge, so I'll issue it a third time.  Tell me how exchanging my work for dollars creates dollars (or at least gives them value, somehow) while exchanging my work for bitcoins does not.

Ugh, you BTC flag wavers are TOUCHY!  It’s simple economics.  If you can make a BTC worth 9 bucks for 25 cents, and the barriers to entry are very little, then other producers will keep entering the marketplace until the price equals cost, ie perfect competition. If you don't even understand this there isn't any point in talking further.

You just made a fool of yourself.  It’s called monetary policy. http://www.federalreserve.gov/monetarypolicy/default.htm
Also, you are dead wrong about GDP, here’s a direct quote from the Bureau of Economic Analysis:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States. Source http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm the opening line.

I’m tired of trying to educate you.  You obviously have your mind made up and wish to stay ignorant.  Do some research and learn about economics before you spout misinformation.

Really interesting break down from both cloud9 and picollo7.  The only problem is I am not so sure you can assume that the cost of generating coin and maintaining the network has anything to do with it's ultimate value.  If anything, I think cause and effect are reversed.  Based on the current price of coin(determined by other means) this would effect the size of the network and number of miners, as they either drop out or expand due to loss or profit.

I don't think bitcoin will have another period of explosive growth until it moves a decimal place or two to the right. The size of most people's rewards is probably limiting its value at the moment.

But as everyone else says, a currency is worth the trust society places in it.

Hmm that makes it sound as if miners will keep jumping to the lowest difficulty blockchain, helping bring it into line with the others.

Add speculation, which might at least prompt some miners to quickly scoop up at least a few of each really easy chain just because it is so darn easy and might some day turn out to appreciate a lot in value, and maybe new blockchains are not such a bad proposition afterall.

I am not even assuming all blockchains will mint coins for miners. Some might already have their coins in one central account or group of accounts from the start and only ever offer transaction fees to miners. Maybe they will find they need to offer high fees, depending on the value miners think the coins are worth to them.

Notice that "to them". If a few pop stars decided to auction off their autographs or used underwear or sperm or eggs or whatever their fans would go crazy for in some new blockchain currency, maybe TsunamiReliefCoin or whatever, then regardless of whether the fans think they can resell the coins or the [whatever] that is rare and maybe not even of any value at all to other than some weird market such as "fans of this that or the other person" some folk might choose to mine the new currency instead of straight out buying it.

(Heh, imagine "you cannot bid unless you actually have the number of coins you are bidding", a whole lot of coins could get bought just to compete for that one pair of so and so's used socks or whatever...)

-MarkM-

(Hmm, TsunamiReliefCoin eh? All 21,000,000 coins in genesis block with private key sent to red cross or somesuch, hmm, an idea?)

(Hmm, maybe the whoever, red cross etc, gives us the public address so we don't even know private key only they do?)

It's all about supply and demand. We all know the upper-limit on supply (21 million bitcoins, most of which aren't for sale). That just leaves demand.

I've given it a lot of thought, and I believe that demand is going to be insane, for reasons that are rarely discussed on this forum. You can check out my reasoning in the thread in my signature: Bitcoin price increases are just getting started

You are completely wrong.


If you don't even understand this there isn't any point in talking further.

This has been a good thread. Thanks 

Actually with the Bitcoin algorithm - it seems that there can only be ONE most economically viable implementation - because as soon as another currency (of higher perceived market value) can be mined at a lower difficulty - miners in the network will point their resource power to the more economically mineable currency - so DIFFICULTY and NETWORK hash size are interrelated to the price of BTC (or one of its forks for that matter).

Pseudonymity, the interest of a select few for various reasons, is just one of Bitcoin's benevolent properties.

The others include, amongst other, the following:  

- Instant
- Vast distances or small distances
- Simple (no client needed when using mybitcoin.com , for example)
- Mobile (mybitcoin.com for example, can be accessed from a mobile smart phone / internet enabled phone or device)
- Secure
- Universal
- Scarcity
- Novelty rewarding early adopters
- Owned and managed by adopters

and most importantly maybe,

- Mercantibility (% of total quantity in existence exchangeable for others over certain period of time) :  

Compared with Gold (~165,000 tonnes/metric tons ever mined, http://didyouknow.org/gold/ ) of which 772,908 open interest 100 troy ounce contracts on the major exchanges for the current month are reported ( http://www.cftc.gov/dea/options/other_sof.htm ) amounting to 772,908 x 0.003110348 = 2,404.01 mtons (metric tons) in current month trade.  This equates to about 2,404.01 / 165,000 x 100% = 1.457% monthly of total Gold in existence.  

Bitcoins presently in existence is 6.347 million ( http://bitcoincharts.com/markets/ ), and a year ago it would have been 365 x 24 x 6 x 50 = 2.628 million less - giving an average of bitcoins in existence for the year of 4.487 million.  For the past 12 months 5,235,547.17 Bitcoins have been traded on the major BTC exchange ( http://bitcoincharts.com/markets/mtgoxUSD_trades.html under Recent Trade Volume 1y ).  This is an average of 436,295.60 BTC per month.  This equates to about 436,295.6 / 4,487,000 x 100% = 9.724% monthly of total BTC in existence.

If the volatile market and exponential growth (maybe attributable to wholesale distribution from existing to new adopters) of BTC is troublesome to a merchant, he may elect to reduce his exposure to BTC by immediately (maybe programmatically) exchanging the received BTC for something else after his transaction with a BTC giving customer has been completed.

Unless I actually want anonymity, paying for it might be an un-needed expense for me.

If my prospective customer(s) want anonymity and I do not, who should be paying its cost, them or me?

If a customer thinks a bitcoin is worth more than a MyRetailGoodsToken(TM) or whatever else I set my prices in, they are welcome to prove it by converting it.

I am just as happy to accept Martian Botcoins and can even get some warm fuzzies from knowing Martian Botcoins are not burning up vast amounts of fossil fuel in hashing arms-races. Ditto for BitNickels, Canadian Digital Notes, United Kingdom Britcoins and various other such digital currencies. Admittedly I have not set up to accept BeerTokens yet though.

So fundamentally is it worth my while to contribute toward bitcoin's vast usage of electricity, or even its vast funding of GPU manufacturers, instead of sticking to digital currencies that do not (yet) require such large expenditures of such things?

Until bitcoiners actually buy something from me using bitcoins, bitcoins are as valuable to me as any other currency no one has actually bought anything from me with. Currencies whose users have actually bought things from me seem so much more "my customers" than people who do not seem inclined to actually buy my products or services.

Since mining a whole new currency of your own is cheaper than mining bitcoins AND people who already bought your own new currency alreeady bouht something from you thus seem more like "your customers" than people using other currencies, maybe the fundamentals of coins you create yourself and provide to your customers so that you can peg your prices to them could look better than the fundamentals of bitcoins?

-MarkM-

Assuming all else stays proportionally the same as the status quo the following is an attempt at an evaluation of BTC value:

- Total current network hash:  3.913 Thash/s  (Source: http://bitcoincharts.com/ )
- Assume typical economical miner's hash :  300 Mhash/s (Source:  http://bitcointalk.org mining forums) - Stand to be corrected
- Assumed estimate of total economically mining machines:  13 000 approximately
- Assume $1000 capital cost per economically mining machine, gives a total network capital cost of $13 million
- Depreciating asset capital cost depreciated over a five year term, gives $2,6 million capital cost depreciation per year.
- Expected Return on capital investment per year (assume 20% - high risk investment), gives $2,6 million return on investment cost.
- Running cost:  electricity, assume 0.5kWh power consumption per machine, at $0.15/kWh assumed average worldwide cost, gives 13 000 x 24 x 365 x 0.5 x 0.15 = $8,5 million total yearly electricity running cost
- Running cost:  rent, salaries, etc, assume just 100% (reimbursing the average miner on a machine only $1000!!! per year!!!! in salaries and rental space) yearly on capital cost, gives $13 million
- Maintenance cost, assume 2% yearly on capital, gives $0,25 million.
- Bringing us to an assumed total yearly cost to business for the Bitcoin network of $26,95 million.  The network generates a total of 50BTC roughly every 10 minutes at present, thus 10 x 6 x 24 x 365 = approximately 525 600 BTC per year.  The total cost per BTC generated securely and maintaining the network at present will thus be approximately $26,95 million divided by 525 600 = approximately $51.27!!!!  Is it a small price to pay for the owner's rights to secure entries in a global digital cryptographic key accounting system - which subsequently allows the owner of the rights to transfer some/all of those rights securely?

Now this cost of $51.27 per BTC is for maintaining a network difficulty of 244139.48158254 ( http://blockexplorer.com/q/getdifficulty ) at present.  When more BTC mining machines are added making the network more secure and difficulty increases ( http://bitcoin.sipa.be/ ) but the bitcoin generation rate remains unchanged - this will result in an increase of BTC securing/generating cost.  Maximum difficulty never to be reached is 2^224 ( https://en.bitcoin.it/wiki/Difficulty#What_is_the_maximum_difficulty? )

You are completely 100% wrong on all points.

The Federal Reserve Bank has nothing to do with the amount in circulation.  (Go here if you'd like to know what they really do)
GDP has nothing to do with work.  (It measures spending ONLY)
Work has nothing to do with dollar creation.

And while I'm at it, this is wrong too:

First, no one knows what anything will be worth tomorrow.  And second, people do things all the time that don't make sense economically.

By the way, I would really like to get back to your insane (and I mean that clinically) notion that one currency is worth its production value, while another is worth its exchange value.  In particular, I'd really love to hear how exchanging my work for dollars creates dollars (or at least gives them value, somehow) while exchanging my work for bitcoins does not.

[edit:  fixed misplaced quote tag]

Sorry, nobody "knows" it will be +15% tomorrow. What everybody does know is the value can go up and down. With that uncertainty, trading bitcoins for cash/services/goods/etc. does make sense.

I don't see any shortage of threads in the Marketplace forum. So even in today's environment, it is happening all over the world.

I'm down. 

Not to mention that the FBI has largely managed to shut down the online gambling (poker and sports) payment processing infrastructure this side of WU and direct bank wires (and even then sending enough WUs to the tropics can get one blacklisted...).

(IMO, there's still a reluctance on the part of the Caribbean/Costa Rican sportsbooks that basically depend on the US market to jump to bitcoin, perhaps because most player accounts are USD denominated etc. and they don't want the hassle of managing bitcoin trading ... there may be a business opportunity for someone who wants to move to the tropics and set up a payment processor to aggregate and manage the trading of BTC for USD and vice versa for the books).

It just doesn't make sense economically to spend BTC today when you know tomorrow it will be worth 15+ percent more.  I'm sure people HAVE used them for goods and services, but not in this current environment where we're seeing at least a dollar a day increase in value.