Bitcoin Forum

Just came across this article on Coindesk:

http://www.coindesk.com/is-518-the-fair-price-of-bitcoin/

According to Alfaquotes, Bitcoin is currently undervalued, its 'fair price' (using the Benjamin Graham formula as a model) is at $518.59.



Considering current price it sounds like a good news, but I'd love to see the detailed calculation.


Related links:

http://www.ibtimes.co.uk/cryptocurrency-round-bitcoin-price-continues-surge-towards-fair-price-1490237

http://en.wikipedia.org/wiki/Benjamin_Graham_formula

Fair price for 1 satoshi in fiat scrip is this:

https://s-media-cache-ak0.pinimg.com/736x/6c/7f/40/6c7f4082cf6cd330c2e02468d6108e80.jpg

It is unethical to endorse violence-backed fiat by accepting it in trade for private keys.
In rational self-interest terms, it is also quite stupid to accept the value of national fiat for everyone except the people printing it and their close friends.

The miracle of fiat is that the governments of these nations have convinced millions of people that they are their close friends. The miracle is that people believe this.
The miracle of bitcoin is that it represents mathematically provable truth based money. This antidote is being injected into a society of deceit.

Is it just me, or did this "Fair Price" calculation use the Labor theory of value? That's the discredited Marxist notion that the value of an item is based on the amount of work to produce it. For example, if we could somehow assign my labor a value of $10/hour, and I spent 100 hours hacking at a hunk of rock with a chisel, the resulting sculpture would be supposedly valued at $1000 - even if it was an unrecognizable mess (which is what I would expect).

Assigning value to bitcoin based on the costs involving in mining it is going at it backwards, IMHO.

Bitcoin isn't undervalued at all at this point.

Bitcoin is a free market, no matter how many formulas and calculations you throw at it, it are the whales, pools and for a part we that decide the price.

After everything that has happened this year it is safe to say that we are heading towards a price that we agree with that this is the right price now.

$518 would be a great price for Bitcoin, but I think being stabled at $350 would be more likely.

Might be backwards to you, but the cost of mining is what at the moment determines the value of bitcoins. The miners spend X amount on the mining rigs and expect X+profit for the coins they mine.

Love your take on the Labor theory :)

A stable price of $5000 would be great to, but we should try to focus on a realstic price, like $350-$550.

The market disagrees. And since only the market counts, the price is about $280 at this point.

Depends on when... The price is still going up strongly in the long term. We're (still) experiencing an exponential growth at this point. And Soon we may be seeing an increase of the 'real' price of $500 per year, or even per month!

Depends by what time frame we could be at that price in 2 weeks really, bitcoin can move so fast, perhaps that is the fair price, perhaps its even higher.  If bitcoin didnt move so fast this would be easier to dismiss.

yes after the highest reaches $1000, I thought it was a fair price, half the price of the highest prices in 2013  ;D

Don't count on Bitcoin having price stability at $5,000, or any other amount measured in fiat.

Mabey with enough time and fiat inflation it will reach $5,000 one day

Usually the price stable on $350 and for now the price is keep increasing.

Maybe it can reach $ 500++ but for not a long time

The thought of the price of Bitcoin being stable is a sad one. I don't know a thing about this model, but life doesn't tend to be fair.

I hope by the end of the year it would be around $500, but it may take even longer to recover from 2014.

It honestly depends on how close we attribute Bitcoin to gold.

Gold can only be predicted with respect to total store, and potentially chemically recreated one for mass production (bear with me on the Sci-Fi a little, I know it may sound stupid, but there is a point - even if it may be incorrect).

Knowing that gold's future supply is variable (as we we use the rate at which we mine it, and the amount we have mined at this rate to predict further stores, AS WELL as the sci-fi point mentioned above), we have to stipulate that Bitcoin has a different context surrounding its valuation.

We know how many maximum bitcoin there will be (in real terms obviously, not nominal terms), we also know that LESS THAN all bitcoin will be recovered (due to losses of wallets and etc.). This FIXED and SMALLER supply has a much different future discount property than the variable nature of what we might perceive our perpetual gold stores to be in the future (again, if we can manufacture that stuff, the model of comparison breaks down).

At this point, to keep it simple and not foray into the territory of delusion (aka my sci-fi comment), we should just take it that the fair value is unknown and that the gold comparison is too linear.

I will add in my opinion that I believe bitcoin is undervalued for the fact that there has been more activity in the sphere despite the lower price, and that if you aggregate the salaries of the talent pursuing the industry as well as the opportunity costs of the venture capitalists supporting them, then the price of bitcoin is not as high as it should be. Furthermore, there is a higher level of acceptance for bitcoin from big 1% companies (microsoft for example) than there was at the same time last year when the price was higher. Add to this that the current drop in price since December 2013 though large, in relation to prior drops (I remember when it went to $8 like two-three years ago) is actually smaller in magnitude and therefore implies a lesser degree of volatility.

That's my two cents, please give me some activity points LOL.

I don't quite understand how people think that Bitcoin is worth more than what you can buy it for at any given time.  I just think of say like a gas station, if they said, well actually the gas price is 3 dollars more than what is posted outside, we are going off speculation here, how many people would actually pay that?  They wouldn't, they would go to the next gas station forcing that gas station to lower its price.  Just like Bitcoins.  No one is going to buy for that much when they can buy for half the cost of it.  Thus the speculation will have to change.

Of course they would prefer it, all currency at the start of it's life is going to be extremely volatile though just take a look at the past and you will see, the thing is it will stabilize in time maybe when we have enough user adoption but there will always be those that manipulate the price unfortunately. Is manipulation the reason why the price is said to be low? I am not sure i very much doubt it is low to be honest the market is a free market and will give the price it thinks is fair not someone writing an article.    

$5000 stable price is just a sweet dream and I don't think the price will go there but I hope the price become stable at around $500

Exactly, just writing down opinions in articles isnt going to make bitcoin more valuable, but the content of recent articles is kind of a public opinion right now.
It indeed is a free market, and with its grow the possible manipulations will also eventualy stop.
Enjoy the ride while it lasts, there is momentum in bitcoin price now, and its going to need some good reason to stop now.

cheers

You heard him China, wake up guys, get us to $500 by Monday Morning! /s But I think most of us can agree that $500 is a good price to be stabled at.

Agreed although i am one of the guys who dumped half of my holdings at 287 and a little lower :)

Well that is all that matters that the articles are close to public opinion as it is where the price is made, to be honest i have seen a lot recently that it should be around the $500! Does this mean people will keep buying at $500 or is this where they would like it to be because 2 different things but i hope it is where people keep buying.

That is something to look forward to i guess but i enjoy the games of the manipulators if i am honest with myself i think it keeps you on your toes and it can also help you increase your stash, like you say enjoy it while it lasts! I do i do lol

If this auction does not slow it down then i agree will need a good reason to slow it down.

You speak for everyone?

Well I don't agree.

What is a price you would like to realistically see? But I will correct it to most.

within 5 years i would like to see $10,000.

I said realistically.

@ Btcvilla

2012 it was at five dollars. only 3 years later at $1200. so what is unrealistic :D ?

It might surely be Underpriced , People are realzing that slowly , just watch it grow.
*Munches some popcorn ;)

You sir "get it". If you can't sell a bitcoin for $518 then it is not worth $518. Unless someone wants to prove me wrong and buy bitcoins from me at $518? I'll do up to a few hundred BTC if your interested?

Exactly right, its pretty stupid.

It's widely agreed that Bitcoin's value is utility and speculation based.

Accurate statement.

I wouldn't be surprised to see a jump to $10,000 if there's an event on the same scale of the 2013 jump.

However, if you're asking me to chose a 3-figure number, $680.19. We've got to be honest, Bitcoin is worth far more than any slip of paper (or plastic) that you get from the gov't, but you have to think about how the masses would be able to use Bitcoin as well. If they're going to be converting their fiat away from... Well... Fiat, we can't have an astronomical barrier of entry.

Considering Bitcoin's possibilities, potential, advantages, and huge space for improvement and market growth and new businesses, I'd say $518 is ridiculously low. I'd be happy to buy bitcoins for $5000 a piece or more, if it were not for the fact that (fortunately, for me) I can currently get them even cheaper!

As other people have said before: the order of magnitude of the current price really makes no sense in the long term. Bitcoin's value is most certainly NOT between $10 and $1000. It's either zero, or much higher.

certainly at the moment one stable price would be between 450$ and 550$.
But I have no doubt that in the coming years we will be hitting the home of the 1000$.

350$ is really fine price i used to love it when it was this but Should be stable only

It should be nice that BTC could reach that price at the end of the year.
And than hoping for a further higher price the next years.
Everything is possible.

5 years for $1000, 15 years for $2500. Bitcoin had its huge growth, its not gonna go up 49900% again.

Cost of production sets the expected selling price of an individual may be. The market price is set by spply and demand. There is low demand now and supply is huge. That is why we get a low market price now.

pfff i would be happy if it comes back to 300 dollars im not even thinking about 500

I'd like the bitcoin ecosystem to develop to the point where it stands ready to take the place of fiat currencies, if and when the managers of fiat currency run them into the ground through mismanagement and deficit spending. It would (will?) be cataclysmic watching the US Dollar and other major currencies go thru a hyperinflationary spiral, but that's really what I expect at some point (granted, the Euro will probably go first).

I keep wondering who on earth imagines that the US Government will be able to repay them on their 30 year T-bills with dollars worth more than the initial investment today? It doesn't make any sense. That's why the Fed has had to step in and buy government debt on a large scale since 2008. The whole system is a dead corpse being kept "alive" with a mess of financial IV tubes and respirators, but at some point even that farce will wear out, and the toolbox is looking pretty empty for further "fixes."

So what is the value of bitcoins as a hedge against currency collapse? If the Euro goes down and the fallout triggers the collapse of the Yen and USD (all facing the same debt situation), who is going to be stupid enough to trust some alternative fiat if bitcoin stands ready to take its place? It would be a lot of work to convert things like equities markets over to being denominated in bitcoin and so forth, but things can happen quickly in a real crisis, if the foundation is laid. And it's being laid every day now.

Think of it this way. Considering America alone, there are <330,000,000 Americans and only ~14 million bitcoin at the moment. So ignoring altcoin possibilities for the moment, each bitcoin would grow to encompass the savings and income of over 20 people. This is why people talk about bitcoin being potentially worth a $1 million each or similar figures. It all comes down to whether a scenario like this plays out. But if there was even a 1% chance of it playing out, that would lead one to reasonably conclude that buying  a few bitcoins at today's prices is a prudent step.

What actually do you/they consider as fair price ?
The price is always fair with one person's perspective but it will never be fair as same .
If you're looking for fair price , just put some in paper wallet for a year or two .
if you use them for buying/selling/trading , it's always fair price .

Do you have any facts or data to support your opinion?

Do you? The price may swing down to under $100 in a month, but I don't think one btc is gonna reach $10,000 unless theres a ton of inflation.

First of all, I said "I would like to see", I didn't make any prediction, whereas you not only made a prediction, you stated it as if it were fact.

Anyway the reason I would not be surprised with exponential growth is based on the possible displacement of several trillion dollar markets, such as gold.

Yes but before I purchase some I hope it goes up.Today i will purchase about 10 btc and hold them til i see at least 100 usd in profit.
Seems like the best way to use the bitcoins holding and profit when price rises.

I dunno, you can't really put an equation on the price. Like many others have stated it's a free market and people can sell for whatever price they'd like while other will buy at whatever price they like. THIS IS WHERE THE HUGE UPSIDE POTENTIAL IS. All you need is a large demand with a limited supply and the price could surge very quickly. We saw it in 2013, and I expect we'll see it again.

There is no such thing as ''fair'' price in business.
In business value or price of something is always dependent on supply and demand.
It's simple like that :)

300 dollars is only a few weeks away , dont worry. im thinking we'll get at 500 in maybe 2 Months or so ?
Price have slowly been going up , but been sinking because of people losing hopes ( exchanges getting hacked etc )

Lets hope all these exchange hacks teach people that their btc is only safe with them  :) .

hopefully it does , i dont understand why exchanges keep getting " hacked " tho , maybe its just scams : <

Exchanges are not sercuring their coins, and I'm sure some of them are inside jobs.

Maybe I am too optimistic, but I feel right now is the time to buy . but only time will tell

I'm just over here waiting for the day the 21 millionth bit coin is made so I can sell my bitcoins while the price is high. ;)

Well, that is a good point if just some of the gold investors decided to hope onto the bitcoin train then it would really be a train lol

We would not need many of them to notice a big difference and where that would take us is unknown to me but it would be pretty exciting time in bitcoin.

We need all investors to hop on the Bitcoin train, it would be really amazing.

makes no difference to me nor alot of other members here.  why is everyone so obsessed with the price of bitcoin without buying any.  those that want high prices are just waiting to sell.  enjoy the low prices and buy.

So, some whales suppress the price and eat as much bitcoins as they want and then burn the sparkle?

With the ability to short coming into play over the last year its one of the reasons we are lower than expected.  It was something new that everyone wanted to try out and it timed very well with a bear market.  Perhaps we'd be still $500-$600 else.

Without looking at the formula, it's certainly still undervalued considering the potential for growth and for world wide mainstream adoption, years down the road. If you consider the market size of existing money remittance service, it should be far higher than that. that is the area where I see bitcoin will most likely excel at.

Bitcoin already seems to be fair at it's price.
Also, 1 BTC will always be = 1 BTC however much it is valued at, so instead of going for fiat, I would prefer a stable price at which we will be able to spend our BTC and don't regret if a price hike happens the next minute, which I am sure nobody wants...

I'm gonna jerk off right now. Thanks bud. Really. :))

This is a wise statement 1 btc will always be 1btc the price people try to put on it are just them trying to force a price on something that already has a price as said above 1btc is 1btc. Why do we want to put fake paper money on something world changing like btc, them habbits need to die hard fk paper fake central bank debts as a value just be happy with have this chance whatever the value.

Hat of to Satoshi!!

Most of you don't seem to understand what "fair price" means. There's fair price and then there's market price.

This is valuing Bitcoin as if it were a company and the equipment used to secure and distribute transactions are the assets.

Your idea that we shouldn't even be using fiat is off-topic.

The valuation is accurate, Bitcoin is currently undervalued.

I agree with you with what your saying.  What I don't agree is what Fair price is for.  Market price in my mind is always the fair price because that is what you can buy/sell it for at a given time.  Fair Price is a speculation of what someone thinks it is worth, and to me that is worthless

It simply isn't. Fair price is certainty, market price is speculation.

Going to disagree with you there completely.  Fair price is:

In accounting and economics, fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset. It takes into account such objective factors as: acquisition/production/distribution costs, replacement costs, or costs of close substitutes.

This means that fair price POTENTIAL to be worth something, or it COULD, in the future be worth that, Again, it is a speculation of what the market price is and what it could be.

That's not what it means. It says potential market price because market price is unpredictable and based on human behavior. Fair price is based on factual evidence and rational logic.

Edit:
Let me give you an example. You and a buddy are neighbors in some remote place. You grow pears in 1 acre, he grows apples in 1 acre. At the end of the grow you and him like to trade some so you both have apples and pears. This season brought you 200 pears and him 400 apples. Fair price has it that you would give him 1 pear for each 2 apples. But, your buddy gives you some long story about how his wife hates pears and convinces you to give him 1 pear for each 1 apple, this is market price.

Bitcoin can't be related to gold. Ever. Bitcoin is a FIAT without its own value. Gold is something natural. There is no correlation within these elements at all.

So what's Ben Graham's formula?

The fair price is where the buyer and the seller can agree...it'll never be a single price, it will always be changing.

That's called market price.

No my friend. There is no good price when you are selling bitcoin. For some it may be worth more than $500 for somebody else only $100. Bitcoin price is based on individual mindset of people. There is nothing like universal price of bitcoin.

Yes there is. http://en.wikipedia.org/wiki/Fair_value

Marvelous post. This is why im never, ever selling. I find absolutely no reasons to ever sell Bitcoin for objectively inferior currency. WHATS the point in any case? I would much rather hold future gold. Until I have a magic ball that would tell me "look, tomorrow there will be a big correction, sell now then REBUY more", my Bitcoin is only leaving my wallet to purchase goods and services.

The price is the average of what everyone is willing to pay for it, there are far to many people to get the mean so just blurt out any number you think and it may well be right :)

Or just take a look at the market price and that will give you the 'fair' price if your lucky 

One more thing I would like to mention is,
I have seen many people barking about "The price should be this, the price should be that." One thing I would like to ask such people is: Have you ever done anything for Bitcoins in order to get it to that price? Just talking BS about price won't get it to there where you want it to be. So, either stop being over-smart or do something to get it to the price you want it to be at.

To put things straight, you are comparing a formula to Bitcoin's price? I don't think it's fair to determine the price of one Bitcoin. We all can argue back and forth about what the price of a Bitcoin "should be", but you can not pinpoint it based on miners. Personally, I do agree the price of a Bitcoin is below what it "should be", (or maybe what I want it to be), but, a formula is not something that can value Bitcoin. Reading the wikipedia article, the formula derives from predicting stock values, so I could see why someone would cross over to BTC.

price is a natural attributes, fair is only in human society,

so i could say that coindesk article is advertising  :(

Bitcoin fair price will always be whatever buyers are willing to pay. 518 is a little high from the looks of it. There needs to be big news to drive the price up and maintain it.

i don't think there is such thing as a "fair price", everything is subjective, bitcoin price should be as a high as possible, due to its deflationary nature

Market price is indeed based on what people are thinking. It depends on the way how people view how the price is going to be and is purely based on speculations without relying on solid factual evidence.

But apparently we can't deny the fact that bitcoin cannot be valued as 1btc=1btc because most of the people are accustomed of seeing some prices in $$.

We have to for a long time, likely forever, you need to buy btc with something, and other currency's is how you do it.

But in the current times? I think it's a no. Unless we get some massive adoption then we can safely say that 1btc=1btc and we can price things with btc.

Nothing can ever be valued by itself, that's recursive, everything is only valued by what you can trade it for.

Agree the only price that counts in the end is the market price.
You may complain that the market may be rigged, as e.g., many gold bugs do, but in the end of the day that is all what counts.

Saw some exciment today, hopefully we will reach $300 this week and $518 in the coming months.

It is backwards to think that miner's costs determine the value of bitcoin. Miners can only move the price by selling (or choosing not to sell) the coins they mine. If miners were to completely stop selling, there are enough coins being traded that it wouldn't affect the price that much, at least in the short term.

The cause-effect relationship is indeed the other way around: the difficulty follows the market price. If the price drops too much, it is no longer economical for some miners to continue operating, and the hash rate drops.

If we take miners out of the equation, the "fair" dollar price should be determined by the amount of trade that uses bitcoins, the money velocity of bitcoins, and the number of bitcoins in existence. So if there are 15M BTC out there, and the transactions performed using BTC add up to $15B/year and each bitcoin changes hands 10 times a year, then the fair price is 15B/15M/10 = $100.

Note that both the trade volume and money velocity are just random guesses here.

The 'fair' price of bitcoin is relevant to its current use. $518 may be fair but it could be much more or much less depending on demand and that is what's key. We need more people owning and transacting with it for the value to inflate.