I've been stating all along that he was wrong because he based his calculations on a flawed premise: That bitcoin's value comes from what you can purchase from it. He's got it backwards. You can purchase things with bitcoin because people value it.
Topic: How to value a currency - page 2. (Read 5239 times)
I've been stating all along that he was wrong because he based his calculations on a flawed premise: That bitcoin's value comes from what you can purchase from it. He's got it backwards. You can purchase things with bitcoin because people value it.
Did you even read my OP, Myrkul?
In other words, people think that it is worth buying, so they buy it.
Do I sense that we are reaching some kind of understanding? 
An expectation of a large future Q is what drives this investment strategy:http://youtu.be/NG1qooBzE2w
So, what is the "intrinsic value" of a bitcoin? You give the number of $50/BTC up there in your OP. Would you care to explain, then, why it's currently trading at $92.45? And why it started at less than a dollar?
Mr. Market can be crazy at times
Additionally it was also at less than a Dollar because Q changes over time.
I'm not saying $50 is the correct valuation. I have no clue how to value a currency. But stating that something is incorrect because a (by definition) speculative market trades it at a different price is just silly.
I wasn't stating it was wrong because the market fluctuates, or even that he failed to derive the same value as the market. I was requesting that he explain, using his equations, why this is so.
I can explain why this is so, simply by stating that the people who use bitcoin value it enough to exchange $92.45 for it. When Bitcoin was in it's infancy, people valued it less, and fewer people valued it. Thus, the price was lower.
I've been stating all along that he was wrong because he based his calculations on a flawed premise: That bitcoin's value comes from what you can purchase from it. He's got it backwards. You can purchase things with bitcoin because people value it.
What drives the speculative valuation of $/BTC is an expectation that Q will become large, that M is contained and that V is also relatively stable.
In other words, people think that it is worth buying, so they buy it.
What drives the speculative valuation of $/BTC is an expectation that Q will become large, that M is contained and that V is also relatively stable.
I think you are presenting the Austrian counter argument of my monetarist argument.
Indeed I am. Value is subjective, and each user of the currency values it differently. To see this quite clearly, look at the other threads here in Speculation. Some bitcoin users value it quite highly, and laugh at people who sold. Others value it less, and laugh at people who bought.People give something value, not a set of formulas.
I don't even know where to start responding to this nonsense. Too much unreflected Austrian theory in here.
So, what is the "intrinsic value" of a bitcoin? You give the number of $50/BTC up there in your OP. Would you care to explain, then, why it's currently trading at $92.45? And why it started at less than a dollar?
Mr. Market can be crazy at times
Additionally it was also at less than a Dollar because Q changes over time.
I'm not saying $50 is the correct valuation. I have no clue how to value a currency. But stating that something is incorrect because a (by definition) speculative market trades it at a different price is just silly.
I think you are presenting the Austrian counter argument of my monetarist argument.
Indeed I am. Value is subjective, and each user of the currency values it differently. To see this quite clearly, look at the other threads here in Speculation. Some bitcoin users value it quite highly, and laugh at people who sold. Others value it less, and laugh at people who bought.People give something value, not a set of formulas.
I don't even know where to start responding to this nonsense. Too much unreflected Austrian theory in here.People give something value, not a set of formulas.
I don't even know where to start responding to this nonsense. Too much unreflected Austrian theory in here. I think you are presenting the Austrian counter argument of my monetarist argument.
Indeed I am. Value is subjective, and each user of the currency values it differently. To see this quite clearly, look at the other threads here in Speculation. Some bitcoin users value it quite highly, and laugh at people who sold. Others value it less, and laugh at people who bought.According to your claims, the price of a currency is totally arbitrary and has nothing to do with the for instance M. Well, what is the problem of printing money then?
People give something value, not a set of formulas.
I think you are presenting the Austrian counter argument of my monetarist argument.
Indeed I am. Value is subjective, and each user of the currency values it differently. To see this quite clearly, look at the other threads here in Speculation. Some bitcoin users value it quite highly, and laugh at people who sold. Others value it less, and laugh at people who bought. A currency derives its value from the objects that you can buy with it.
A currency derives it's value from the desire of it's users to accept it. If the users of a currency really want that currency, it's value will be high, and you can purchase large amounts of other things for small amounts of the currency. If the users of a currency do not want that currency, it's value will be low, and you will require large amounts of currency to buy small amounts of other things.
A currency derives it's value from the desire of it's users to accept it.
How is this different than "from the objects that you can buy with it?" A currency derives it's value from the desire of it's users to accept it. If the users of a currency really want that currency, it's value will be high, and you can purchase large amounts of other things for small amounts of the currency. If the users of a currency do not want that currency, it's value will be low, and you will require large amounts of currency to buy small amounts of other things.
How is this different than "from the objects that you can buy with it?" Should he have qualified it with the "quantity" of objects, or the "amount of different" and "quantity" of objects? In either case, it's in the same vein, and entirely sound. A currency derives its value from the objects that you can buy with it.
I'm afraid you're wrong, here. Since the rest of your formula hinges off this flawed premise, it's interesting, but futile, maths.
A currency derives it's value from the desire of it's users to accept it. If the users of a currency really want that currency, it's value will be high, and you can purchase large amounts of other things for small amounts of the currency. If the users of a currency do not want that currency, it's value will be low, and you will require large amounts of currency to buy small amounts of other things.
Q is the dollar value of goods being traded in BTCs. Silk Road has an overturn on about 1m per month I have heard, and Bitcoinstore has a revenue of 400k-500k dollars per month, I believe. This is 1.5m dollars per month. Let us assume that these two constitute a tenth of the total bitcoin trade. So the total BTC trade is worth 30m dollars per month that is 180m dollars per year, let us round that up to Q=200m $ per year.
What about USD? There are about a trillion dollars in circulation, and you can buy them with bitcoins, so it seems like your Q is off by several orders of magnitude.
But 100 million dollars per month on MtGox is.
And that would make Q=1.2bn $ + 40 %(?) ~ 1.7 bn $ and thus val = 420 $/BTC all other factors held constant. Interesting. But the other factors have very large uncertainties though.Edit: 40 % to take into account all those BTCs that are not traded on Mt. Gox.
Q is the dollar value of goods being traded in BTCs. Silk Road has an overturn on about 1m per month I have heard, and Bitcoinstore has a revenue of 400k-500k dollars per month, I believe. This is 1.5m dollars per month. Let us assume that these two constitute a tenth of the total bitcoin trade. So the total BTC trade is worth 30m dollars per month that is 180m dollars per year, let us round that up to Q=200m $ per year.
What about USD? There are about a trillion dollars in circulation, and you can buy them with bitcoins, so it seems like your Q is off by several orders of magnitude.
I believe you have misunderstood something... These trillions of dollars are not traded in BTCs.
How do you separate the dollars that are traded for bitcoin with the dollars that are not? Just curious what the methodology is.
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