Bitcoin Forum

What gives Bitcoin its value?

Supply and demand?

Surely, as more merchants accept Bitcoin, more bitcoin gets sold for $$ driving the price down. The lower the price, the more people will panic and sell their BTC or trade it for goods, thus reinforcing the cycle.

I am getting to the point now where I am so tempted to sell my own BTC. I don't normally waver on things like this, I believed Bitcoin had a bright future, but my belief is shaken now.

I can't see anything in the near future that will increase the demand side of the equation....

Bitcoin network gives us the ability to send any amount of money anywhere on the planet, instantly, for no fee, without having to trust a third person. That's the value of bitcoin, and people are willing to pay a price for that value (ability).

http://www.notbeinggoverned.com/gave-bitcoin-value/

Don't forget that in order to buy something with bitcoins, you have to buy the bitcoins, driving the price up.

I don't see anything in the near term either, but in the long term, Bitcoin looks good.

In the long term, the Blockchain looks good, Bitcoins aren't really necessary




Yes, bitcoins must be bought but they are then sold at the other end...

There is only value if users actually trade the currency not just hodl it.

And how to maintain the Blockchain, without bitcoins?

This is a question that has been debated and debated. Some argue their is no value, some argue their is extreme untapped potential. Likely the truth rest in the middle somewhere. The market, as always will decide the value.

The Bitcoins protect the Blockchain and the Blockchain protects the Bitcoins.
Can not have one without the other.

You can't love the Ledger System and not its Ledger Currency.

P.S. I think price is current Buy Demand..

You may hear a lot that the value is in the blockchain. It is a new technology where there is information kept in a public blockchain. The reality of it is it forms a decentralized network forming a currency that can transfer value for goods and services and that one single Bitcoin alone can run an entire economy. There is a lot of value in that.

Well done. I think in 6 months to a year this will be self evident to the majority.

Small economies can function around their own currency because everything is priced in it. Rent, utilities, labour & most supplies. So if you know your outgoings are 5000 BananaBits, then you can keep the BananaBits you receive as payment even if they're volatile. However if someone pays you in a volatile MonkeyNuts you have no choice but to sell them for BananaBits. This is Bitcoin's problem. Every business is working around expenses priced in their own fiat currency or one of the major fiats if they do business internationally. Anything other than fiat is currently unsuitable as a transactional currency. Even if they were paid in Gold they would have to convert to fiat to budget for their expenses, unless their country worked on a gold standard.

Example: You have an online retail business - If your next 3 months of expenses - staff, rent, utility and average supplies totals $45 000 and you make $50 000 worth of Bitcoin. How much of it can you keep in Bitcoin and pay your expenses as they're due, knowing that you'll be able to meet them?

The answer is very little because even if Bitcoin goes down 20% you're now in the red. Most retailers work on very tight margins of a only a few %, so this is a problem they can't have.

Even if your supplier accepts Bitcoin, the price they charge in Bitcoin fluctuates with the exchange rate. So you can't set aside 500 BTC for a supplier that charges 1 BTC a widget because if Bitcoin halves in value, he'll charge 2BTC a widget and your budget will be messed up.

(An exception to this is countries with highly inflationary currencies, which is why Argentina is often cited as most likely to adopt Bitcoin. In their case a highly volatile currency like Bitcoin is superior to a rapidly depreciating one.)

What is the solution?

It is simple, straightforward and already here. Currency stable assets. Businesses can hold the stable currency asset while we can hold the unstable crypto-currency that backs it. The more demand there is for the stable BitCurrency the more the value of the backing currency increases.

Using the same example above

You have an online retail business - If your next 3 months of expenses - staff, rent, utility and average supplies totals $45 000 and you make 50 000 BitUSD. How much of it can you keep in BitUSD and pay your expenses as they're due, knowing that you'll be able to meet them? The answer is you can keep nearly all of the earnings in BitUSD.

Overstock for example tried to keep a bit of their sales in Bitcoin and probably got bitten with the price fall, whereas they could have kept it in BitUSD & not had that problem while still supporting crypto-currency.

I think this is fairly straightforward and I have yet to see a decent rebuttal to this argument.

I also believe crypto is doing better than ever before, more people know about it, more places accept it and more transactions are happening. The price is a reflection of the volatility problem not of the lack of Bitcoin adoption.

More and more people who don't trust the global banking system anymore.
More and more people who don't want to pay tax on everything.
More and more people who want to shop online without being traced.

BTC's growing, and so is the number of people using it.

It seems correct to say that the supply side is growing faster that the demand side right now, but we know the supply's growth will be halved sometimes, so we shall remain confident in the longer term. There will be a day when demand will outgrow supply, just like it did last year.

What are currency stable assets? How do they work?

Best comment so far. That's gold right there.  ;D

Wouldn't more merchants accepting bitcoins give them more value as they (bitcoins) are then given more utility? To the majority of people if you can spend bitcoins at say a walmart, target, etc. they would be much more willing to buy them because of their benefits over USD.

if I understand well
you mean when demand get over supply, the price of Bitcoin will go up? (Correct me if I'm wrong, do not know much about economics, but I like to speculate in order to understand)
last year there was a big drop

It's quite the opposite.

In the short term, no, in my opinion, it's exactly the opposite.

Early adopters aren't likely to be pro investers. They're likely to be (no offence meant) geeky types.

Now we have a load of guys sitting there with 10 - 200 BTC that at one point were pretty much useless. All of a sudden, they're worth quite a bit of money, but hard to turn to cash. So, now that BitPay will accept them on say Overstock, mr geek can buy himself a new PC or whatever with his BTC that he previously had no use for.

Problem is that BitPay just sell the BTC for cash straight away, thus increasing supply for BTC and driving down price.

Ahh but then what about the people that buy BTC to pay for goods?

Lol. Really. Pull the other one.

I worked it out once what it would cost for some goods in the UK paid in BTC.

I can't remember the exact figures, but it was something like I could buy a GPU/mobo/CPU from Scan and pay £900 in currency, or, I could go to LBC and buy Bitcoins, then use those Bitcoins to buy the same goods. With the markup on the BTC from LBC, then the reduced rate from BitPay at the other end, I would have had to buy about £1,050 worth of BTC for the same goods.

Alternatively, I could buy my BTC through BTCE. It would reduce the amount I had to pay slightly, maybe £975 or something, but to get funds into any of the exchanges takes ages. At least 3 days. By that time I could have had the goods delivered and installed.

They are assets that hold the value of currencies like USD and others on a blockchain.

On coinmarketcap there are 3 in the top 40. NuBits, CoinoUSD & BitUSD

CoinoUSD is a user issued asset that has dollars in an actual bank backing it. I don't like that because it's centralized. https://coinomat.com/coinousd.php

NuBits is a decentralized dollar stable asset controlled by holders of NuShares and it creates and controls the currency supply similar to how a central bank does https://nubits.com/about/white-paper#buy-side-liquidity

BitUSD is a decentralized dollar stable asset by BitShares. It works similarly to a financial instrument that is called a contract for difference. http://bitshares.org/the-value-proposition-of-bitshares-part-ii-bitassets/

People who want to take a leveraged position on BitShares can short a BitAsset like BitUSD at the current exchange rate. The shorts are required to lock up $2 worth of BitShares as collateral for every BitUSD they short and they compete on how much interest they're willing to pay the longs.  

When a long (Someone who wants 1 BitUSD) meets a short, a new fungible BitUSD is created.
(BitUSD is destroyed when shorts cover to reclaim there collateral.)

It sounds complicated, but buying BitUSD is very simple and straightforward for the end user but results in a dollar stable decentralized asset which is transparently backed by an average of 300% collateral and pays interest.  It also means every BitUSD creates a lot of demand for BitShares :)

Disclosure: I own BitShares, so I'm biased for it.

I really think decentralized currency stable assets will transform the fortunes of crypto & the uptrend will resume once they gain adoption for the reasons described in my earlier post.

What I love about BTC, is that we *never* really had a reason to question why does $1=$1.  We simply dont get taught alot of things about money. Making something "out of thin air", and millions of kilowatts, provokes people to ask these questions.

Ostensibly, supply and demand.

Reality: market manipulation by illegal trading by BitStamp and BTC-E

Well Warren Buffet equivaled checque = bitcoin ( it¨s only paper, information) but you don´t have to forget to print this paper and process it you need banks so actually we´re talking about 5000bilion´s of USD value so what price have bitcoin which is replacing all these institutes? Well I think Btc value in 10 years will 10 - 100 000USD it´s true about this ... think about it :-)

Well, I was oversimplifying. BTC grew so high and so fast last year, that many early investors choose to cash in, and many more got scared. As a rule of thumb, growth is good, but the faster the growth, the larger the risk of a downfall.

I think supply and demand is definitely a big one. 3600 coins a day flooding the market. God knows how many other stolen coins being cashed out (gox).

It will get its value from an increase in it's utility. Micro payments have real potential. However I think we need the ETF to bring in new money. It really will be an easy way to invest in bitcoin without the technical and logistical farce it is today for the not so tech savvy.

the value of bitcoin is as everything, what people is paying for it.

There is no more

hope OP dumped it already. Pretty bloody day.

Bit coiun  gets its value strictly by the people buying and selling it, there is a huge supply and absolutely no demand. So the only thing controlling bitcoin is its tradable value. Without that bitcoin would be worthless like the rocks in your driveway. You pay for them, they retain a value but yu will never sell them for a profit.

^
The VALUE of bitcoin is that Bitcoin network gives us the ability to send any amount of money anywhere on the planet, instantly, for no fee, without having to trust a third person, and people are willing to pay a PRICE for that VALUE. http://www.notbeinggoverned.com/gave-bitcoin-value/

The price right now is not in the domain of supply and demand of the market, but in the hands of speculative traders, that can move the price any way they want.

(BTW, I don't understand your last sentence, I bought some BTC at $65, sold some at $650, there is profit)

The VALUE of bitcoin is that bring convenience to people。

One thing's for sure: the only ones making money now are the daytraders glued to their monitors shorting it every 3 minutes.

Agree! very good point.

I may add BTC china, OKcoin, LakeBTC and Huobi.

there is no demand, only sell preasure

The value of Bitcoin is in freedom, it`s not control of any subject in fact.

On opposite the issue is that thanks to his freedom there is a lot of fear to just accept it and use properly - properly means to me just to exchange fast, almost free and fast the value.

If everyone will just hold it does not help. It`s here to be used daily, with everyone.

The only problem is, spending it means losing money...because bitcoin is still measured against the dollar.  So it's purchasing price is decreasing as we speak.  When or if it ever comes a point where bitcoin gains complete independence from the value of fiat, then this won't be a discussion. 

I imagine there are still many baholders out there that still don't want to trade or spend their bitcoin at this price because they'd be taking a huge loss.  It's psychological, but at the same time not everyone is rich enough to have the freedom to just be tossing bitcoins around and taking losses without batting an eyelash.

Yeah....wish I had. Sadly, not.

What conditions would satisfy what you would judge as an increase?

There are lots of speculations that the increasing merchant activity drives down the price. In the meantime data and proper analysis indicate that this is a completely false conclusion.

As you can see at http://www.coindesk.com/analysis-around-70-bitcoins-dormant-least-six-months/   "Swanson also points out a "sobering" trend: although the number of merchants accepting bitcoin has increased fourfold this year, blockchain activity is not seeing a corresponding increase."

There are other underlying issues with Bitcoin and/or with its surroundings  that cause the current price drop, the issue is not the merchant activity.

Value is all subjective, if you don't believe that it has value, then it has no value to you

Well, something like an upcoming 'upgrade' to Bitcoin's code that would increase its utility.

Or maybe an upcoming halving of the mined blocks.

I think part of the problem is that in the early days, Bitcoin was mine-able by the enthusiast. Now it's sort of gone 'professional' / 'corporate' and people are losing interest.
There was another spike in the price when LTC was mine-able by the enthusiast, but as the ASICs came, the interest of the enthusiast somewhat died away and the price crashed.

I wonder, if someone could produce a graph showing 'mine-ability'.

E.g. Date on the X axis, and KH or MH of the bitcoin network on the Y axis.
A second line with KH or MH of the LTC network on the Y axis also.

Perhaps there's correlation between the 'mine-ability' and the spikes in price in 2011 and 2014

"I am getting to the point now where I am so tempted to sell my own BTC. I don't normally waver on things like this, I believed Bitcoin had a bright future, but my belief is shaken now."

Listen to your tummy!!! or you know, have a cookie.

Belief and investing huh? Belief that was clearly based on price.

Well now that you're asking the internet what to do with your money... I think you should sell. If for no other reason then the future posts we'll get to read about how you're kicking yourself now that the price is so much higher.

There is no value. 

Bitcoin gets is value from a variety of things, one in particular is its network effects. There are number of altcoins that are technically superior but if nobody is using them (which they are not) they don't have value.