Bitcoin Forum

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Every asset price is determined not only by fundamentals, balance of the company, or whatever metric. The price is determined mostly by investors expectations about the future.

https://www.investopedia.com/terms/m/marketsentiment.asp

For example, even if you metric is correct, but there is a strong felling that energy prices will go down, or that bitcoin will be banned in US, the price will fall.

your entire argument is flawed because security is not something that has levels (at least not in the way you are describing it). something is either secure or it is not. in case of bitcoin, it is either expensive enough to attack bitcoin which makes it secure or it is not which makes it insecure.

not to mention that in the end the only deciding factor is the demand for bitcoin. it can continue to have the same hashrate and as long as the demand continues rising the price will too. and vice versa, meaning if demand decreased, even if the hashrate remains the same, price will fall.

Personally, I don't think it has any relationship with the hash rate, I think that Bitcoin's value is mostly tied to its utility (or its potential utility at the moment).

Because Bitcoin doesn't have a huge amount of utility right now, and still more complicated than it should be to use, its price is suffering.

After all, there's less than half a bitcoin for every millionaire in the world right now. If it reaches peak saturation, it could be worth around $2 million each.

However, that's definitely quite a way off.

Thing is that even if we consider bitcoin as a security whose value can be measured then also there are a number of things that would effect it's value than merely the hash rate. Which are for example the buzz and demand created around in the market which could be channelized by Economic and political Situation. In case there is a Economic crash in fiat bitcoin could possibly become more popular which could lead to increased prices. Also last I heard someone even tried to value btc based on stock to flow approach but that would only work is an equivalent demand is generated.

You can't set the price. The price is determined in the market by supply and demand. As for coming up with some formula for determining its value, good luck with that.

If the price of bitcoin can be set, then it is centralized asset as other investment schemes. The limited supply to the increasing demand is the one that generates value for each coin. It is impossible to make some formula and make bitcoin get stick to it, such an act will ruin the growth as well the unique features of bitcoin.

No it is practically not possible. If there is no demand then the price will remain stagnent. The price of Bitcoin has to be determined by demand and supply. With your calculation the price will never rise to the level everyone is expecting it to.

You may care only about the security, but someone else might care about the convenience, and someone else might care about the privacy, etc. Different people value different things. Each person will determine the value of a bitcoin to them and will buy or sell based on that. A market takes all different those values and aggregates them into a single price.

The hash rate doesn't ultimately determine the security. The security is dependent on the cost of an attack, and (for any mining-based attack) the cost is ultimately determined by the value of the block reward.

most new cryptocurrency innovators like those in ethereum, think they could exploit those weakness of bitcoin especially with its lack of utility and more to produce cryptocurrency with better use case but the case had been difference. Some of these use cases of the new coin cant produce a sustainable market demand. e.g the ICO crowdfund dumps the value or price of ethereum whenever they want to convert into fiat. However, bitcoin promised nothing but remains the indomitable

I don't know where you heard about this, but that´s not how the market works. Market price works with expectations, not with "rationality"
Also, you can check this famous quote from John Maynard Keynes

"Markets can remain irrational a lot longer than you and I can remain solvent."

No its not related. Bitcoin cannot control things outside Bitcoin, certainly not USD, you cannot code anything like that, and you cannot enforce it either it would be another pegging system. Pegging is bad, it depends on people. Bitcoin is about being trust-less, not trust someone will keep his/her promise...

The best price bitcoin ever has, is whatever the market decides. The beauty is in the freedom it fluctuates within, with nothing outside attempting to force any artificial price only to have the thing blow up later.

The only good intervention, is no intervention. You have to change your mindset, fluctuation is good, learn to live with it, stop trying to oppose it, embrace it and love the freedom it entails. It means it will never blow up, like "stablecoins" and fiats do.

Oh but you have never lived a crash of your fiat in your lifetime, the people in charge never let it blow up... Doesn't mean it can't. This is the fundamental problem, trust in those people, trust they would never do what things like Maduro and Mugabe and several many other idiots in history did, back to the ancient Romans and Greeks... (https://mises.org/library/forty-centuries-wage-and-price-controls-how-not-fight-inflation)

Bitcoin: In Code We Trust.


Are you worried about something? That mining will decline? Cast your doubts aside, mining WILL decline, its designed like that. Find another source of income now that you know it.

Also you are wrong thinking your money becomes less secure with less mining, the less mining is a result of it becoming too expensive, which is what makes the thing secure to attacks in the first place, that it is too expensive to pull out a 51% attack, and that is not changing. It is the very reason, in fact, that mining will decline, because its too expensive to keep it in such large scale anymore.

Its not on/off either, mining will slowly diminish at the same time the asics are so efficient the hashrate is the highest ever, even with reducing mining, and large operations closing, and the equipment to do it so expensive. And by the time most commercial miners are gone, those that remain are plenty (efficient) enough to keep things secure.

So you are indeed, wrong.

It seems good times are ahead. Recently Chinese president said to his countrymen to seize the opportunities afforded by blockchain. On 2017, china central bank banned mainland based exchanges to stop their operation, recent comment of Chinese president actually adds positive vibes. Price climbs 12% overnight. BTC will bloom as it is the key player in crypto industry

And the halving. But its bad when they mention blockchain but not Bitcoin. Originally the Chinese politicians were angry at ICOs but ended kicking exchanges, they still have to get it.

If they bring yet another centralized State backed token, they still fail to grasp the fundamental reason why Bitcoin is still the best. Sure anyone can use "blockchain" for little side projects, but it is Bitcoin that is revolutionizing the world, not blockchain.

Even with it accountability and security features, the price of Bitcoin cannot be easily determined like that.
This is just one thing no one can propose and it becomes possible.
This quality of it makes exploitation impossible; something very different from fiat.

In terms of price determination of bitcoin and cryptocurrencies in general, the hash rate has little or no influence on the market value of Bitcoin and cryptocurrencies. Just like any other product in the financial market, the rate of demand for Bitcoin is the main determinant of the market price of it. Once there is a decline in the rate at which demand the use of Bitcoin or its supply exceeds more than the demand, there will be a drop in the market value of Bitcoin. With this, the hash rate has nothing to the market price of Bitcoin.

Toady we have nice move price Bitcoin! How do you feel it?

It is a very good proposal and would give a more stable price, the problem is that currently the price is fixed based on speculation, there is a fight between bulls and bears in investments and thus the price is changing and of course other external factors as opinions of politicians, businessmen, new applications, scalability, etc.

so you think bitcoin price movements can be very expensive depending on the level of difficulty of mining and increasing the hash makes sense, bitcoin can also increase when there is good news that can trigger traders to buy bitcoin like the current condition of bitcoin prices at the exchange who have started to increase prices.

Setting bitcoins price on hash is not gonna work.
Bitcoin is just like anything in our daily or online market everything is dictated by the law of supply and demand this is the one who contributes big time om bitcoins price growth from time to time.

Why are you making your own price?

Create your own world if you want that to happen.
What difference does it have with those who can control the market if you are doing that?
There is no more freedom in it.
All should rely on how people will use it, if they like it, demands and supply. You could always speculate but never be a dictator of everything.

I believe bitcoin price always depend on the market status. The law of supply and demand will always be the factor of the price. The decision of every coin holder whether to hold or to sell will affect the market price.

Fixing the ratio at $100 per EH/s is completely arbitrary. You have no basis for that ratio.

Furthermore, the hash rate has risen much more quickly than the price because of technological advances, so the proper price varies wildly depending on when you fix it.

If you fixed the ratio a year ago when the hash rate was about 50 EH/s and the price was $7.5k, you would say that the current price should be $15k.
If you fixed the ratio two years year ago when the hash rate was about 10 EH/s and the price was about $8k, you would say that the current price should be $80k.
If you fixed the ratio 5 years year ago when the hash rate was about 0.3 EH/s and the price was about $400, you would say that the current price should be $120k.

Demand is the only thing that drives the price of bitcoin, i have seen many correlation between the price and the hash rate but the fact is that people tend to spend more money in mining tools only if the price of bitcoin is going up and hence we see that the hash rate is higher whenever there is a rally in bitcoin. In short hash rate is directly proportional to the price of bitcoin or the expected price.

You can create a formula based on hash rate, but it won't be rational to anyone looking at it outside of the crypto community. 

I have always said that bitcoin is not like a stock, where an analyst can look at the company's earnings, dividend, growth rate, the CEO's salary, and all sorts of other variables in order to come up with a price that the stock should be selling for.  And even when analysts do come up with a price, there's usually much disagreement about it and it may be completely wrong.

Bitcoin doesn't have intrinsic value based on electricity consumption, hash rates, or anything else.  It's value is derived purely by supply and demand--any attempt to say what bitcoin should be selling for is just delusional IMO, and no offense to OP here.  I bet if you do use OP's method, the price you get will not be what the market says it should be 99.999% of the time, and if that's true the method would be worthless.  Again, no offense.

It won't be rational, period. Hash rate security obviously underpins Bitcoin's value, but it would be silly to try and produce some mathematical formula like this.

Increasing hash rate simply indicates increased mining investments or efficiency improvements. Miners themselves are speculators. They are investing in mining operations because they expect higher prices. Like all investors, they are prone to over-speculation. Simply put, sometimes they are wrong about the market.

Hash rate had been continually increasing throughout 2018, up until the November crash. Then we had 3 successive drops in difficulty. This clearly shows that miners respond to price, not the other way around. So I think the OP's approach is a bad one.

Not true. How about if you spend more mining a bitcoin than the market will pay for it? That's why miners were shutting down in November-December 2018, because the crash made them unprofitable. Those miners expected price to rise and they were very wrong.

Nobody said you have to keep selling as you mine it. When you choose to mine you know you're in for the long run. Like hodler who moves his coins out of the exchange and into a wallet generated offline then prints a paper wallet and hides it. He's not going to dig out and compromise his paper wallet every time the price dips below the price he paid. A miner can also keep mining and holding.

10k is a very rational price. We shouldn't put labels on it but it seems fair to pay this much.

Anyone can baghold if they want to. That's not the point.

The OP's idea implies miners dictate the market price. That essentially means that miners collectively are always right in their market speculations, and as long as hash rate keeps rising, so will price.

I was just pointing out how that's not true. Therefore you can't extrapolate price or value from the hash rate. Miners are guessing just like the rest of us.

Or maybe it is just the opposite.
Hashrates are being driven by bitcoin price, what about that!
If bitcoin price rises then more miners will join and hashrates will rise, if bitcoin price falls then some miners will leave and hashrates will fall.

I don't understand how you related hash rates to the current price for BTC. I'm pretty sure that like every other coin out there, BTC price is determined by simple supply and demand though. Even if we do think of Rational Price as something different from normal price, determining it based on Hash rates seems to be wrong. The recent news and events affect supply and demand so if we kind of force it, we can say that it indirectly affects the price and thats quite a legitimate explanation.
Besides, Miners are just like us, speculating on BTC price. I doubt they could set the price of BTC depending on hash rates involved even if they wanted to.

It could be like this, but i'm not sure people are only mine it when the price is high.
If based on your opinion, the miners who still mine when the price still low and no other people mine it, they will get much.
And when the price is up, they will sell.
But i think, bitcoin miners will always mine whatever the price will be, so i think the rise of hashrate is not the reason why bitcoin price pump.

According to recent news I heard about mining. Mining hash rate increase after the dump of bitcoin. Meaning that miners is still hopeful about the price of bitcoin ddspite the downtrend of price. This might be some factor to be consider. Seeing miners that still positive gives boost to the investor to invest more. I'm not telling that its the main reason but just a factor to be consider.

Miners cannot have any affect in the bitcoin price as its as simple as they lend their electricity, Internet and mining device for a small commission and they cannot do much when it comes to pricing and infact users are losing interest in mining as it gives too little profit and I have stopped it as well if more users does then the transaction speed will be reduced that's all. As far as price is concerned it's purely demand and supply and people should get this straight into their head.

This is nothing but the old labor theory of value in which the value of an object is supposedly determined by the work needed to make that good, but the current accepted theory is the subjective theory of value which states the value of something is not determined by anything but the demand coming from individuals, and if you are questioning yourself what is the rational price of bitcoin? The answer is simple, whatever people want to pay for it.

strongly agree with your opinion.

it is never easy to make an assumption about something you say as a rational price where in fact that the cryptocurrency nature itself is always moving irrational because of the decentralized system.
besides that factor, it has been pretty popular especially these days when the world economic situation in uncertain position, that fundamentals taking big part on driving crypto price. am i wrong? i don't think so , you can look around in the past few days. 
which means you can not talk something rational, something makes sense when it comes to a market where nobody can control thw whole thing.
the price will stay volatile no matter what , nobody can really predicting correctly about the future bitcoin price yes it sounds speculative but it is what it is.

Not true. Miners do have impact on Bitcoin price. How would you explain why block halving affects the price so much. Simply it's because miners begin to receive smaller block rewards and they are not willing to sell those bitcoins at the same price anymore. So they don't put their bitcoins on the market until the price rises enough so that mining is profitable again.

While your point of view on metrics might be true and I agree if there is a rational base price to avoid massive dump, but it isn't the case for bitcoin price, yes it can be a reference but we know the price mostly defined by the market.
Not only bitcoin, everything in this world, the prices determined by two parties (buyer and seller), even for something precious which holds higher value like a diamond or luxury cars, if no one wants to buy, it means nothing "0" in the market.
If bitcoin price set by hash metric, then its price will always rise up since there always more people who want to become miners and more ASICs add to the network.

Compiling any formulas for determining the price of bitcoin or any other decentralized cryptocurrency will be deliberately erroneous. Such a formula simply does not exist and cannot exist. The price of a decentralized cryptocurrency completely depends on the ratio of supply and demand in the market. These factors cannot be predictable. The actual price of the cryptocurrency is only the one that exists at the moment. In a moment, the real price for it will already be different.

There were no prediction which were made in last one and half years have even reached closer to how the market has been and it will be foolishness to depend of predictions or analysis because we know very well those days are gone when it used to work but since there are too many big players involved in the bitcoin market we cannot predict how they can alter the demand and supply according to their plan which will affect the entire market and we are small fish trying to get benefited by these fluctuations.

If this succeeds will remain like that or it just a coincidence well have you try to look back at previous year do that have anything too? bitcoin prices all real from the beginning until become a big at this moment ,see pull of price bitcoin not on hash as you mean it's only for miner and it's just a coincidence

Cool idea and why shouldnt the world be this neat but the fly in the soup here is the inclusion of the $ sign.   We cant rely on a constant $ value, I guess perhaps we can refer to 2019 $ and account for its variability afterwards.    If we do that we might as well go back to 1971 and take the last fixed price for dollar as the measure, in fact we'd take the grams or troy ounces of gold equal at that time as it would translate in a non changing measure physically.

The free market will always set the price with some error up or down and it generally does eventually do a good job of accounting for various inflation and excess supply available.   If we could fix BTC to another commodity, it might be energy as that is used to create the price and gold can also be said to have a relationship to the oil price again with energy a large part of the costs to mine gold.   So that is the way I'd go to find a constant relationship in the price.

I do think there is some good comparable measure here between blockchains thats fair reflection of approximate worth.

BTC is a currency, the price of it depends to its demand and supply just as fiat currencies which fluctuation can be seen in foreign exchange. If BTC is a currency then price will dip and bounce.

Security is one reason why BTC price could go up, hashrate makes it more secure and zooming out the chart we'll see that from the beginning BTC is actually rising since 2009. Zooming in to particular time frame in the charts will make it difficult to see where the price can go.

Since 2009, we have overall seen increase in the value of bitcoin and also a significant increase has been observed in the number of bitcoin users i.e. both investors and holders. Though the journey of bitcoin is full of pumps and dumps but on the whole, people have observed progress in bitcoin along with altcoins. Even in present situation, we shall simply increase investment in bitcoin and it will pump harder than we are expecting.

Most buyers aren't really interested in the fundamentals even though it's very important to focus on if you're long term minded. It's just the repetitive nature of this market's cycles that interests buyers.

Hashrate follows price, so as long as we see the price go up, the hashrate will go up too even though there could be a few month delay. Similarly, the hashrate will drop when the price drops because it's no longer profitable to mine.

We saw that happen in 2018 where the hashrate almost halved at one point because the price kept falling consistently for nearly a whole year. It shocked a lot of people because they didn't believe $6k would break.