How bitcoin price is calculated exactly ?

OmegaStarScream

staff

Activity: 3500

Merit: 6152

Quote from: michietn94 on July 15, 2015, 11:36:45 AM

As far as I know the price depend on supply and demand.
For other factors such as :
Goverment Policy: if goverment accept bitcoin as legal payment, the value might be increase

I know that's pretty logic , people will wonder what Bitcoin is from curiousity and end up using it at the end and since Goverment is allowing it and using it then people will buy more and more (more demand) => rise price . I understand that .

Quote from: OnkelPaul on July 15, 2015, 08:57:14 AM

Actually, price determination is a pretty complex process.
If there is a market (enough buy and sell orders) then the price will be determined by supply and demand.
Between exchanges (and other places where buying or selling takes place) there is some amount of arbitrage (when you can buy BTC at one exchange for $285 and can sell them at another exchange for $295, some folks will buy on one exchange and sell on the other, adjusting supply, demand and prices on both exchanges.)

Without markets, determining a price is difficult. Remember the classic bitcoin pizza? At that time, a future price of $1 per Bitcoin was considered pretty much impossible, so Bitcoin was valued much less than that. Later on, when it became clear that you could not only buy pizza with BTC, people were gradually willing to value it more.

Onkel Paul

the pizza example makes sense and it's a very good example to explain things Grin

highlly appreciate your help man

michietn94

legendary

Activity: 1274

Merit: 1001

As far as I know the price depend on supply and demand.
For other factors such as :
Goverment Policy: if goverment accept bitcoin as legal payment, the value might be increase

OnkelPaul

legendary

Activity: 1039

Merit: 1005

Actually, price determination is a pretty complex process.
If there is a market (enough buy and sell orders) then the price will be determined by supply and demand.
Between exchanges (and other places where buying or selling takes place) there is some amount of arbitrage (when you can buy BTC at one exchange for $285 and can sell them at another exchange for $295, some folks will buy on one exchange and sell on the other, adjusting supply, demand and prices on both exchanges.)

Without markets, determining a price is difficult. Remember the classic bitcoin pizza? At that time, a future price of $1 per Bitcoin was considered pretty much impossible, so Bitcoin was valued much less than that. Later on, when it became clear that you could not only buy pizza with BTC, people were gradually willing to value it more.

Onkel Paul

goodguyed

sr. member

Activity: 388

Merit: 250

Twitter: @goodguyed

Supply and demand, as any market.

More demand than supply, price rises.
More supply than demand, price lowers.
Demand at $150 and supply at $160 means the price will go down as there is surplus at $160.
Vice versa.

You don't need an exchange to be able to set a market price. An exchange just helps find a buyer/seller more efficiently.

OmegaStarScream

staff

Activity: 3500

Merit: 6152

Quote from: Dannie on July 15, 2015, 08:36:19 AM

When someone wants to buy bitcoin at a certain price, and another person wants to sell bitcoin at the same price, the buy order and sell order will be matched. The trade will be executed and then we will get a price.
Each exchange has its own order book, so it is normal to have a different price on a different exchange.

Actually I said "I don't see how a lot of exchange have the same price " , Just different of 1-2 bucks or sometimes cents I know .
Other then that how it will be calculated if we don't use exchange and how it was before creating any exchanges before

Dannie

legendary

Activity: 910

Merit: 1000

When someone wants to buy bitcoin at a certain price, and another person wants to sell bitcoin at the same price, the buy order and sell order will be matched. The trade will be executed and then we will get a price.
Each exchange has its own order book, so it is normal to have a different price on a different exchange.

OmegaStarScream

staff

Activity: 3500

Merit: 6152

So how the bitcoin price is calculated exactly , yes Supply and demand but how ?? I mean at the beggining I'am pretty sure there wasen't any exchange and now there is a lot ... but even if exchange I don't see how a lot of exchange have the same price :/ pretty sure I'am missing something here

Most of all ... What will happen if we stop using exchanges or all exchange gets closed ? (I know it's most likely impossible) but just theorically so I understand how things works , that time how the price going to be calculated

Topic: How bitcoin price is calculated exactly ? (Read 736 times)