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Hello all,
I'm currently reading the paper: Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin by A. Hayes. At page 1316 and further you will find some formulas that he uses to calculate the fundamental value. I would like to replicate his finding using todays figures (he calculated it around april 2016), and see whether or Bitcoin's price equal the outcome of the formula.
The expected number of bitcoins expected to be produced per day can be calculated as follows:
BTC/day = [(β · ρ)/(δ · 2^32)] · sec(hr) · hr(day) (1)
where β is the block reward (at 2016 25 BTC/block) , ρ is the hashing power employed by a miner, and δ is the difficulty (which is expressed in units of GH/block). The constant sechr is the number of seconds in an hour (3600), while hrday is the number of hours in a day (24).
Hayes sets ρ = 1000 GH/s
The cost of mining per day, E(day) can be expressed as follows:
E(day) = (price per kWh · hrday · W per GH/s)(ρ/1000 GH/s) (3)
Assuming that the bitcoin market is a competitive market, the marginal product of mining should be equal to its marginal cost, so that the $/BTC (equilibrium) price level is given by the ratio of (cost/day) / (BTC/day):
p = E(day)/(BTC/day) (4)
Other assumptions: average electricity cost: 0.13 cents KW/H. Average energy efficiency 0.40W per GH. Mining difficulty 166,851,513,283
Yields for a 1 TH/s (1000 GH/s) mining rig approximately: (0.13*24*0.40)*(1000 /1000) = $1.248/day. (3)
Equation (1) yields 0.00301 BTC/day. and (4) (1.248 $/day)/(0.00301 BTC/day) = $414.62/ BTC.
My question:
1. what would be a good approximation of the average hash power employed by a miner currently. And what about the average energy efficiency? Are there any sources that can give an indication?
If I hold all else constant but adjust the mining difficulty to 3511060552899 and the block reward to 12.5 I find a value of 17.425 which does not come close to the current value.
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There is one element that you have missed out - and that is world events.
Bitcoin was launched just after the great financial crash in Jan 2009 - it's likely that if we hadn't had the credit crunch, it would have never been launched.
It then remained a pure nerd currency until 2013, when the EU decided to seize the savings of the people of Cyprus to bail out their banks. People went bankrupt, as did businesses. There were stories of businesses who had their payroll in their current account ready to send it to their employees and the EU seizing all the money to bail out the banks.
That is the real point bitcoin took off - it's based on distrust of corrupt authorities. Without orgs like the EU stealing people's money, bitcoin wouldn't be as popular, it would be just like second life tokens, a curiosity.
Interesting point. I assumed that market events would affect the price. Currently I plan to use a financial market stress indicator (e.g. OFR financial market stress index) that generates an aggregate measure of several underlying indices. See: https://www.financialresearch.gov/financial-stress-index/files/indicators/index.htmlI also found a data set on sentiment that I'm planning to use in my research. A sentiment score is based on several scanned documents e.g. social media, blogs, forums etc. Perhaps I can assume that if there are extreme events in the world, unrelated to Bitcoin, financial stress would go up. Unrelated events: north korea for instance. Regarding related events, or the overall sentiment and stress regarding Bitcoin, I'm planning to use sentiment data. Update research so farIts a lot of work and a struggle to find data. I've two issues at the moment. If anyone could help me, I would appreciate it. I pledge to share the results of the research  Problem 1: data on ICO volume is limited. I can't find a good source that captures amount of funding raised per time stamp. This variable is really important I believe. According to traditional finance literature, it appears that IPO volume raised goes up when the overall sentiment is positive. IPO volume hit a low around 2008. Since it appears that ICOs go up during a price climb of Bitcoin, I believe that a similar relationship exists in the world of cryptocurrencies. Does someone know a good source about ICO funding volume raised?Problem 2: Google search queries might be related to the Price as well. According to earlier research, it appears that the relative amount of search queries is a good explanatory factor. The problem: Google trends https://trends.google.nl/trends/ only provides daily data for a timeframe of 90 days. I really need daily data. Does someone know a way to retrieve daily data for long time frames? (5 years +). In april i'm going to start with the analysis of the data and start with the first regressions. If someone knows a way to solve of the above mentioned problems, I would really appreciate it!!!! |
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Hi all, Im looking for a good source that provides daily data on ICO funding. I already found this one: https://www.coindesk.com/ico-tracker/ but once you download the data, you find out that it isn't that recent (<2018). Two other sources are: https://www.coinschedule.com/icos.html and https://www.icodata.io/stats/2018 but apart from reporting different funding amounts per period, I wondered whether there are perhaps better sources out there? Reason for asking is because im doing a research on the possible price determinants of Bitcoin and im trying to find out what the relation between ICO volume and the price of Bitcoin is. Any help is appreciated  |
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No, I actually mean any sector that is related to information technologies, computer hardware and finance. Maybe take a look at startups in those sectors as well, although I'm not sure how much of this information is public.
As far as I know none of the American companies in this space are publicly traded yet. (Ignoring companies that simply put "Blockchain" in their name such as the Long Blockchain Corp FKA Long Island Iced Tea Corp and companies that so far only dabbled with permissioned blockchains such as JP Morgan. Come to think of it, maybe it does make sense to look at companies that only dabbled with blockchains after all.)
Other metrics that just came to my head:
1) Wallet downloads
2) Amount of visitors to Bitcoin related websites and exchanges (eg. using Alexa ranking)
3) Subscriptions to cryptocurrency related subreddits
Just throwing some ideas out there, not sure how much sense it will make for your work in practice.
I was just going to comment on this, but Heretik's post probably better explains the other variable I feel you need to take into account, which is "number of market users/players". The timelines you use, if you include 2017/18, will have a distinctly difference in terms of market makers/users. Cambridge is the only academic reference I know of (2017) that tried to put a number to unique Bitcoin users, but I daresay this number dwarfs those of previous periods/timelines. It's an important variable because the price swings in 2011 would be much easier to manipulate or be impacted by a handful of players (or even one major exchange) than it would be today where even the largest exchange can only do so little. You can then apply the same reasoning to your other variables, if you believe they have influence: hashrate, etc. And yes, please share. A lot of students come here looking for feedback, I always try to participate, but we seldom get anything back. Again thanks all. I'm going to dig a little deeper in variables that are 'usage' related variables i.e. wallet downloads or number of unique Bitcoin users (though quite hard to estimate). haha, i will create an agenda item that reminds me of sharing the information. |
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Honestly, while it may look simple to comprehend on the top layer, it isn't when it comes down to bitcoin and the power players who push the price up and down. But in reality, there are probably a ton of groups (politicians, bankers, traditional investors, people from the mainstream media, miners from all places, exchange owners, and so on and so forth.
So I mean I really can't wait to see this, it'll be eye-opening for me and many others in cryptos
Interesting point. Indeed, on the top layer I include trading volume and it doesn't differentiate between groups. It would be very valuable if that information would be available as it indicates groups to follow or have an eye on. |
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Be sure to share your thesis once you've got your master's degree Of courseA few thoughts: 1) Take a close look at timeframes when it comes to behavioural related indicators. It has been brought up before that an increase in google searches leads to a price increase, however it is just as likely that the cause and effect are the other way round -- ie. the price drives the increase in google searches. It would be interesting to see whether either causality can be debunked or confirmed when looking at the concrete time frames more closely. yes, i'm aware of the causality issue. Probably a granger causality test among others will be used. Thanks2) The following economical variables may also be interesting to look at: a) Gold A lot of mixed results regarding Gold. Some studies suggest Bitcoin has properties like gold i.e. being a safe haven. In general, the relationship between gold and Bitcoin is weak b) Closely related industry sectors, eg. NASDAQ, finance Do you mean by closely related, sectors that make use of blockchain technology? c) alt coins (trading volume, popularity, the rate at which new coins and tokens emerge) Will take a look at thisThank you!! |
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Hi all, To finish my master I have to write a master thesis economics. The subject of my thesis is Bitcoin and to be more precise the study attempts to find out which factors significantly influence (determine) the price of Bitcoin. In this post, I will give a brief overview of my research proposal. I would like to start a discussion and find out whether or not I should include other variables that are expected to be connected with the price of Bitcoin. Regarding prior studies: Prior studies highlighted several perspectives among which: economical, technical and behavioral related variables. - Economic related variables (Interest, Dow Jones industry average, gold price, major indices) resulted in mixed results / no strong influence. Bitcoin economical related variables such as trading volume and trade exchange ratio were positively related with the price. - Technical (mining difficulty, hash rate): in general, the technical related variables had a significant positive impact on the price of Bitcoin. - Behavioral related (Google search queries, Wikipedia, Tweets) very significant and positively related with the price of Bitcoin. Summing related works, it appears that the price of Bitcoin is mainly driven by behavioral related variables ('investors attractiveness'). Hence, some authors state that Bitcoin is highly speculative. In order to extent prior work, I aim to contribute in the following way: - Use a longer time horizon that includes the increase of volume of 2017 and decrease in 2018. - Use a new behavioral related variable that has not been studied before. - Perhaps differentiate between time periods So far, I include the following variables in my research: - Technical: Hash rate - Economical: Shanghai Stock Index, S&P500(?), trading volume; - Behavioral: Google search queries and a new unexplored variable The decision to include above variables is based on literature review. Probably a VeC or Var model will be used...tbd Im currently looking through all the materials that have been published so far. If you think this is incomplete please say so, suggestions are welcome! Other question: on blockchain there was a metric know as the "Trade Exchange Ratio" ( https://www.quandl.com/data/BCHAIN/TVTVR-Bitcoin-Trade-Volume-vs-Transaction-Volume-Ratio). However, the ratio is not being supported anymore. Does anyone have a clue if there is another data source ? |
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