Bitcoin Forum

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

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.

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 (https://www.cnet.com/personal-finance/crypto/heres-how-much-electricity-it-takes-to-mine-bitcoin-and-why-people-are-worried/)

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.

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?

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'

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.

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.

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

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.

@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.  

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.

Bitcoin price of course can experience up and down every day, bitcoin can increase to the highest price at any time, but it can also drop sharply to the lowest price (no price at all), This condition is called (price fluctuation).
What makes the price of bitcoin have value is supply and demand, bitcoin Cannot be controlled by Commodities Like fiat money. The mechanism of supply and demand for fiat money is always controlled by the central bank. This does not apply to bitcoin.
Until now, no particular authority has dared to intervene when there is an "unreasonable" supply and demand for Bitcoin. So for that reason it is not impossible that the price of Bitcoin could head towards the bubble if the demand is out of control.

About the amount it costs to produce 1 BTC in terms of mining costs, already explained in great detail by @franky1.

If we talk about true value, it is different from the value induced by cost of production. You might spend much in producing a product, but the product will not be of any value. Value is proportional to demand.
I will only demand for something that is valuable to me.
Then in the other hand, bitcoin is not a product.
Let us see bitcoin as a currency. So, can the value of US dollar be determined by the cost of printing it?
I believe that value according to cost of production is only applicable to the genesis and early mining stage of bitcoin.

Franky1 being Franky and again talking about things he doesn't have a clue about.

https://www.sec.gov/Archives/edgar/data/1874985/000121390022001845/fs12022a5_rhodium.htm#T17


https://www.globenewswire.com/news-release/2021/11/30/2342749/0/en/Bitcoin-Self-Miner-Griid-Infrastructure-to-List-on-the-NYSE-Through-Merger-With-Adit-Edtech-Acquisition-Corp.html

https://www.datacenterdynamics.com/en/news/bitcoin-miner-marathon-signs-coal-fired-electricity-montana/

Should I post more?
Of course, all those mining companies are stupid and you know better than everyone by simply splitting the hashrate with the most efficient gear that this is the rule for everyone and that's it. At no point has in your little tired brain came the idea that some of the miners have long ROI with gear that was in place for years, so they could still afford to run it at a simple margin rate of 10% not even caring about stupid generalistic computations. There are poeple on this forum who have mined with that gear for 2-3 and even 4 years, they have ROI already and they couldn't care about those split costs of your, meaning that the actual pie for everyone else starting mining is far bigger.

Let's not even count the fact that in October 2020 the hashrate was 140exa, the price was 10k, how the fuck would that be possible with gear 3 times less efficient, the minimum cost per coin was 500K then?  ;D ;D

But I have to love the fact that you even dare to actually believe somebody is mining with 37 cents per kwh, because it makes so much sense!!!!

The cost of mining is different in different areas and regions as mining cost depends upon a number of factors, the major one being the electricity cost. However, the true value of bitcoin is not calculated by average mining cost. If you calculate this price, it will be the minimum price of bitcoin and not the fair value. The true price of bitcoin is what people are willing to pay for, in order to buy bitcoin and this true value will increase with time as more people invest in bitcoin.

I definitely agree with you here because some days ago I read this post, https://bitcointalk.org/index.php?topic=5381365.0 Back then Bitcoin didn't have the type of value we see in it today hence the winner of the 25BTC did not accept them rather asked to be paid $40 instead. Source (http://www.world-today-news.com/sziky-on-the-bitcoins-won-at-the-2011-starcraft-tournament-i-didnt-take-them-i-asked-them-to-pay-me-40-games/) So it is safe to say that the true value of Bitcoin is what people are willing to pay which has been dynamic over time.

There's no exact value of mining Bitcoin since it's vary by the difficulty, electric cost and mining rigs you used to mine. Back in the days where you can mine using CPU or GPU with low difficulty, but nowadays you need good rigs in able to mine it.

I'd say the mining cost isn't the true value of Bitcoin, it's different with production cost where the product isn't scarce and you can produce whatever amount you want. The true value of Bitcoin is 1BTC = 1BTC.

Seems like you're asking two different questions -- the costs associated with mining and the value of BTC within the context of mining costs...so you're essentially asking what the profit is?

There isn't anyone that can answer that -- BTC's price is not at a fixed position, setting aside the varying costs of mining. A bit of a pointless question to ask. The "true" value of BTC is not calculated by taking the asking price subtracted by the mining cost because you're assuming the asking price is fixed.

First of all Bitcoin doesn't have a global adoption it value relies on the constant supply and demand of this said digital asset meaning if by chance investors decides to dump Bitcoin completely it would result to a 100% useless commodity same thing is applicable to legal tenders if the citizens decides to abandon it, it losses its value completely

Surely the OP is familiar in some way with the concept of fair or objective value that is applied to companies to calculate the value of shares and buy or sell accordingly. Broadly speaking, you account for the assets and liabilities of the company, taking into account some other things (like sales performance over the last 5 years, and some projections) to calculate a value that divided by all the shares of the company tells you whether to buy or sell.

But Bitcoin is essentially different in this sense, as already noted. We cannot calculate a true value with which to know if Bitcoin is overvalued or undervalued at the moment, for that there are other indicators, such as the fear and greed index and others, but for those of us who believe that the Bitcoin will play an important role in the history of mankind and therefore in the long term will rise a lot in price, Bitcoin is always undervalued.

funny thing is..
for years i have been running charts of the cheapest and most expensive mining costs.. and treated that as a value window.
and in 99.99% of chart plots the price sits within the mining cost value window.

check one example recently
https://bitcointalk.org/index.php?topic=5382559.msg59053731#msg59053731
the blue and purple line is mining cheap-premium. and if you look at the peaks and valleys of mining cost. and then look forward a few days,weeks the price then follows with a peak or valley.

this is because when it costs more to mine, for instance in USA than the price is. hobby miners switch off their asics to then buy. which then makes the price rise with the mining cost.

when its cheaper to mine than the price. people turn on their miners and stop buying.
check out the april mining cost dip. and then the price dip in may
check out the june mining dip due to china.. and then the price dip in july

yes the november 2021-jan2022 is a bear sign where prices decrease even when the costs dont, but that shows the cheapest miners remained bullish from jun-december even with a market being bear november-december.. but even so even now today the price sits within the value window of cost. the bottomline blue are the cheapest miners on the planet and they only react when their profit margin gets small. they dont react daily, weekly monthly they only started reacting in january this year and only a small amount of them cheap asics miners reacted

But even the value of a product isn't based fully on production cost. Take GPUs, for example. It can cost, say, $400 (https://www.quora.com/How-much-does-it-cost-NVIDIA-or-AMD-to-manufacture-GPUs-e-g-RTX-3070-RTX-3080-compared-to-how-much-they-sell-for-at-MSRP-e-g-500-700-How-do-they-choose-the-pricing) to manufacture (including salaries and stuff), it can allegedly be sold (MSRP, I mean) for $750, but actually cost $1800 (https://www.tomshardware.com/news/gpu-pricing-index) on the market. So even for products there's a great gap between the production cost and the product's value. So with Bitcoin I guess it's just exacerbated because the demand and supply play an even bigger role, but it's not like a product is defined by its production cost either.

The Value and the Price aren't the same things. Most likely you mixed it. The value of Bitcoin totally depends on how people are adapting it and how the community growing. It's because Bitcoin is a decentralized cryptocurrency backed by the community. As much as the real use case increase, the value increases as well.

On the other hand, price fully depends on demand and supply. Nothing to do with the mining cost. Miners are making a profit, so whatever the cost it won't hire than the price they earn. Price always moves based on buyer and seller emissions.

You are looking at this from the wrong perspective, it seems that you think that just because something costs X to produce then that is its value, but things do not work like that, that is the labor theory of value which is closely related to communist ideas, but this is wrong, just take a look at shitcoins, it takes you a certain amount of money to mine them, however if the development is awful then you will never recover your investment, it does not matter how much money you spent you will never recover it as the coin was not worth it.

So it does not mater how much money was necessary to mine a bitcoin, the value of bitcoin, and anything else by the way, depends on how much people are willing to pay for it.

Funny thing is that you are using numbers that satisfy your conclusion otherwise as I've told you elsewhere and you ignored it the cheapest electricity cost is $0.002/kwh in other words your minimum is 20 times higher than the actual minimum.

You are ignoring the size of the market. There aren't enough "hobby miners" that would buy bitcoin in your scenario to have any kind of effect on the price.

I feel that just saying that Bitcoin is not a product doesn't really explain it. The price of a bitcoin is not influenced by its production cost because production is fixed. Producers (miners) can't adjust production in response to price, so they have no influence over the price, in contrast to most other products.

I also want to point out that value and price are different, but related. Value is subjective. The value of a bitcoin is higher to a person that wants to buy it than to a person that wants to sell it. Price is an objective measure of the aggregate value.

It's the same as ethereum and dogecoin.

Not sure if its more or less than an NFT

The value for most things usually comes from the demand and supply. But, if you should take away the demand and supply, maybe we would say that the value should come from the cost that it takes to produce that product. So, maybe we can use another product in this context, let’s say for example a bottle of coke: if we are to say what’s the value of a bottle of coke, then we would have to talk about the ingredients that were used in making that coke, and if what it cost to make that Coke was $10, maybe we can say the value is $10 , because that’s what it cost to produce it.

And if you are going to sell it, you already know for sure that you wouldn’t be selling it anything below that $10, if you do, then it’s going to be a loss for you. So for Bitcoin, we can say that the cost for mining one Bitcoin should be the value for it I guess. But at the end, if something doesn’t have demand, then it’s of no use.

When you talk about the sales performance, then you are still talking about the demand and supply that the OP had said to be removed. In this case, I wouldn’t say that shares is the right thing to be using as an example, because shares are basically all about the level of demand and supply or should I say sales performance in a company, and the shares in a company wouldn't have any value at all if there are no sales performance or demand and supply in that company.

But in Bitcoin, you have to mine it which means that it is quite different. Before you mined it, there were things involved. Will say that Bitcoin is like gold, what does it cost to mine a gold?

That kind of valuation is hard as there are many factors to consider. The labor, equipment, taxes, etc. In terms of gold price, the mining cost has long been established and they just add other things on top of the basic mining cost. Aside from that, the supply and demand finally determines the price. So maybe, the OP is asking about the cost of equipment, energy consumption, labor on how to mine for example 1BTC. But this one depends also on what miner you will use, how long you will mine (energy consumption), people involved, and tax. In that case, maybe the OP wants to calculate this via mining calculators like - https://whattomine.com/.

To know the value or worth of any commodity demand and supply is important ,because is when there's demand that producer will produce more good and supply them. And for bitcoin it will be difficult to calculate the value because the price is not stable,well the miners may be able to calculate the cost of mining by calculating cost of electricity or fuel for generator,or any other thing they use for the mining.