Topic: True Value of BTC - page 2. (Read 303 times)

Production cost is inefficient to represent the actual value of bitcoins. It would be possible to create a coin which lacks many of the features of Bitcoin, but is as difficult to mine; People would not buy this coin or token at an elevated value, simply because of the cost to produce it.

Bitcoin was created with unique features that makes it valuable and attracts the demand ebi h grows the price and that is more of an indication to the intrinsic value of Bitcoin.
The cost to mine bitcoins also varies with time and location making it rather difficult to get an exact price, you'll instead have a range of what the amount could be.

@franky1 explained it very well, thanks to him.

Make it simple, a simple answer is because the demand is the supply of which it trades that the seller is willing to sell and the buyer is willing to buy and that's how we determine the price of bitcoin. The good thing is bitcoin price didn't pegged to anything which means each currency has a different value.  So if the market which dollar has been used it should determine to the buyer that willing to buy.  

No asset will have value if there is no demand and supply, there won't be a need for bitcoin mining activities if the demand and supply are taken away because the will be zero transaction for the miners to confirm which automatically result in zero block reward for the miners so ultimately that can never happen.

values(features and benefits) are the emotional choices of demand
value(cost cheap or premium) are the economic measures that can be quantified

yes many people see different values(F&B) and decide how much its worth to them emotionally and then tag on a price point they see as their values
yes different countries have different acquisition costs (buying or mining) and decide which is more value.

which explains the SPOT PRICE volatility within the economic value window

when bitcoins hashrate was averaging 150exa its economic value window was ~$30k-$70k
which is why with all the price swings. the price refused to go below $30k and the price refused to go above $70k

everything inbetween that bottom and upper economic value metric. is the speculative emotion of 'values(F&B)and other reasons for demand'

right now with the value window at upto $84k no one and i mean no one values bitcoin to be worth buying for $100k, because everyone on the planet can mine it much cheaper.

the hashrate and relative acquisition costs have to go up 20%+ as a minimum increase, before japan/germany will even consider buying the spot price in an upward trajectory to hit $100k.
an it would require double hashrate increase for america to consider buying upto $100k
an it would require triple hashrate increase for iceland/kazahkstan to consider buying upto $100k

Bitcoin is not a product that means that bitcoin price is not decided by its production cost.

What you are asking only works for products, like a car for example. They have a production cost and that decides what the finial value of it is. But in case of bitcoin the only deciding factor is the utilities that bitcoin provides and the supply & demand (or adoption) of it.

Even more interesting is that for bitcoin the "production cost" (ie. the mining cost) is decided based on bitcoin's price not the other way around.

Value is subjective, especially for things like bitcoin. If your thesis is that bitcoin would be used worldwide for SoV and currency, then obviously your opinion on it's "true value" is sky high from here. On the other hand if you think bitcoin is a scam or is useless, then obviously your opinion on it's "true value" is zero.

if there is no demand. EG bitcoin has no usefulness. then no one would use it, meaning no reason to mine it.
but bitcoin does have a use/purpose. so people do demand it. and so then the cost(value) then comes in because people ARE mining it

if gold could be mined in a backyard using nothing more then a spoon and a coffee filter for $2 an ounce. then the market would be about $2-$5
but because it costs over $900 to mine gold the market is $900-$2k
the 'supply/demand' speculation is not the $900 value. its the variable/volatile emotion of the above $900 part.
but underlying value/cost sets it at the least of $900 becasue thats the cheapest mining cost, no one wants to sell below

the simple calculation is find the most widely used ASIC details
        brand                    hashrate     electric     hardware cost               regional power cost
EG antminer S19pro      110thash     3.25kw     $12,000(2 year ROI)            $0.04/kwh

and the network hashrate say 195exa(195,000,000thash)
first calculate the asic cost
195,000,000/110=1,772,727 asics
then total up all the asic hardware cost
1772727 * 12000 = $21,272,727,272.73
then calculate the hardware cost per block
21,272,727,272.73 / 105000 = $202597.40       (bitcoin mines 210k blocks/4 years so 105k per 2year average ROI)

now for the electric
1772727 * 3.25 * 0.04= $230,454                 the electric used per hour for the network
then per block
230454 / 6 = 38409.085

then add hardware and electric.
38409.085 + $202597.40 = $241,006.48
now calculate per btc
$241006.48 / 6.25 = $38,561.04

ofcourse. the network hashrate is high in this example. as is the electric region low in this example. so adjust to better amounts.
EG todays 183exa hash is $36,188.05 for cheapest electric ($0.04)
EG todays 183exa hash is $83,768.05 for expensive electric (0.37)

no one mining can mine cheaper than $36k and no one mining can mine more expensive than $84k
and so al the emotional decisions to buy occur between $36k-$84k

for instance. japan/germany with highest costs wont mine for $84k if they can buy it cheaper
no one on planet wants to pay $84k if they live in america at 0.13 electric rate meaning they can mine it for $49k or just buy it for less. so even america would be hopping out of mining and just buying right now
kazahkstan and iceland can mine cheap so instead of buying they are mining.

and now you can understand why the "demand" of the PRICE is so volatile between the $36k-$84k'value-premium cost range'

Anything will not any value if no one really cares about it. in fact, in the marketplace, there had been many good products (based on standards adopted) that eventually died because of the lack of demand. However, Bitcoin goes beyond the supply and demand thing...I would say that its value is based on the features it is offering. One, it is decentralized which means we are on the control and not anybody out there at the top who can even be unelected and can be unaccountable pulling the strings. Two, you can convert your money to Bitcoin and have it be transferred to anyone, anywhere in the globe at the least cost. Three, because of limited supply and the existing and presumably growing demand this is deflationary as a counter to fiat money which is always inflationary so in this case Bitcoin can also be considered as a good way to protect one's wealth - of course one can argue of its volatile nature so the solution is to hodl and never sell at a loss. There are many other factors but those can be technical and can be beyond my simple mind. In summary, to people who love Bitcoin and the ideas it represent BTC will always be valuable and to people who only see the "dark" side of it then it will just go away and be in the category of the Tulip Scam centuries ago. Now, the question is: Which side are you?

I guess it is false to equate production cost with the true value of something. There may be times when production cost is the primary consideration in giving something its reasonable price-- I'm not even speaking of true value-- but the moment the supply and demand factor does not cooperate, the production cost factor will have to give way. Such is the reason why there are instances in which goods are thrown away, left unharvested, sold at a loss, and so on. This is also the reason why certain factories, farms, manufacturing companies, and so forth face bankruptcy. The market has the strongest say in terms of value.

Bitmax is right, without the supply and demand, bitcoin surely has no value. It's just the same as the other things that we posses, if it has no demand for it, there might be a value but eventually it will go to zero if no one's wanting it. It's the demand that drives the value of a thing and for bitcoin, it's obvious that there's a big demand for it. And about the mining cost, maybe some data you need is here: Here's how much electricity it takes to mine Bitcoin and why people are worried

Actually, it won't get any value if there is no supply and demand traders and exchange is who decides how much the price of Bitcoin. There is no fixed price for Bitcoin.

If you talk about mining costs it depends on your Electricity rate and difficulty and the buyers if how much they want to buy your BTC.
You can't just calculate it without the price of BTC that is why there is exchange supply and demand who decide what will be the price of BTC.

Hi,

What is the true value of BTC. If we take aside supply/demand and focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Thanks