Topic: What is Bitcoin's fair value? (Read 1723 times)

Yesterday, BlackRock Strategist Richard Turnill said there’s no inherent right or wrong Bitcoin price, no fair value. On multiple occasions Bitcoin has been criticized for lacking fair value. I haven't come across any stats or traditional methods that can be used to calculate Bitcoin's fair value, but does that mean Bitcoin doesn't have a fair value?

I found an article on Investopedia about how to measure Bitcoin's fair market value. I don't think this framework is statistically accurate, but theoretically plausible. Almost all predictions regarding Bitcoin price are speculative in nature, but backed by a solid belief that Bitcoin's scarcity and its underlying technology is potentially revolutionary which would have an impact on different sectors. Bitcoin has value because people think it has value, right. It means Bitcoins have positive expected value.

The total market value of a currency, its "monetary base", is driven by two things, transactional demand and reservation demand.

1. Transactional demand - Daily transaction volume.

2. Reservation demand - Hoarding/long-term investment.

It is expected that with more merchant adoption the transactional demand would increase.

3. Hurdle rate - Rate of return required to compensate for the risks associated with holding Bitcoin. Yeah, technopolitical hurdles or backlash from a country can have an impact on Bitcoin's expected value.

Theoretically, the fair-market value of one BTC should simply be the dividend of its predicted future monetary base (total market cap) and BTC in circulation, discounted by a "hurdle rate."


http://www.investopedia.com/articles/investing/050914/easy-way-measure-bitcoins-fair-market-value-doityourself-guide.asp?

Of course, the price which is derived from the demand and supply is the actual price of Bitcoin but when it comes to the value, I would consider acquisition cost and other aspects related to it. For a miner, the fair value for Bitcoin is the cost which he spent in the mining operations, he will definitely expect some profit on the acquisition cost and that would be the market price of Bitcoin from his end. When it comes to the fair value, I would take the average of top bid/ask prices from the market (I don't want to cut the rewards of the sellers here).

I don't think that the bitcoin has a fair value because it is really depending on the demand of the people in the market. The value of bitcoin is always fair because the price is being dictated by the demand and there is nothing that we can do with that thing. The value of bitcoin will not become fair if there is manipulator in the market only but right now, the market seems good and well maintained.

I think with coming years if BTC usage in reality not expands the price of BTC can drop more and more by the time.

Am I wrong?

bitcoin prices are very expensive because they are very small and hard to find while very high demand, this becomes the main trigger of bitcoin price increase.

It is hard to identify bitcoin's fair value right now since people sees it as an asset and thinks that price will go high in the future most people are willing to pay more than it's current price for future investment. Unlike other currencies that has gold to determine it's fair value bitcoin don't have any purely supply and demand.

That is just the point. If there is no one willing to pay $7000+ for it, then we will just keep hanging at a particular price and if there is no real demand for it, then people would be willing to give it out at a lower value.

As long as there would keep being demand for it as long as we get to a point that it becomes useful then the value is perfect at that moment and that is the worth! In short, there cannot be any fixed value for bitcoins as it is purely people's preferences to afford any price levels to buy and to use.

There is nothing in this world with which we can determine the fair value of bitcoin. It is because of the reason that the only thing which determines the market price of bitcoin is the demand of bitcoin in the international market.

With the increase in demand, the market price of bitcoin also increases. There is no hard and fast rule which can help us in knowing this thing that this is the faro amount.