Bitcoin value in exchanges vs. its value in the real economy

[freehorizon]

I am trying to understand how to evaluate the value of Bitcoin.
Its not that simple as it sounds. I have a feeling that Bitcoin value in the exchanges does not represent its value in the real economy.
I wrote a blog post about it: http://blog.leancrowds.com/en/2015/04/supply-and-demand-in-bitcoin-economy/

What do you think?

[randy8777]

at this point bitcoin price indeed doesn't represent what it really should be. for example look at 2013 where it jumped to $1100 if you compare bitcoin with how it is now, then the value should be higher as we are so much further then we were in 2013
i know the $1000 at that time wasn't legit, but it was to give an example.

[Q7]

I hope there is no confusion here because price and value are two different things. Price does no always reflect the true value as in the case of the numbers that you see in exchangers -- it is merely a integer determined by the intersection of supply and demand factor. Value on the other hand is another thing. Take for example, if I value an item at $100, then logically if the item is priced anything below that amount, then I'll be willing to dig down deep into my pocket and fork out that number to pay for it.

Now goes back to the question on whether bitcoin is undervalued, then we have to consider several factors. Question is what can i do with the coins that i hold, what benefit does it bring compared to the conventional paper money that i have, how safe or convenient it is to use, what advantages does it hold? From there, you should be able to assign its value. And don't forget it's just an arbitrary number depending on person to person.

[Amph]

the price is a measure of the value, right now the current price say that bitcoin is really undervalued and we all know this(or at least we should), the real value of bitcoin should be much higher, something that can be measured with a price of 10k+ at least

i like to think that a price between 10k and 100k can determinate a correct value for bitcoin, this is based on my opinion that any person should have at least 1 btc

[tyz]

The value depends on the acceptance as a payment option. Because Bitcoin is not widely accepted for payment yet there is much space for value increase. Actually the real value depends on what the people are ready to pay for it.

[johnyj]

I am trying to understand how to evaluate the value of Bitcoin.
Its not that simple as it sounds. I have a feeling that Bitcoin value in the exchanges does not represent its value in the real economy.
I wrote a blog post about it: http://blog.leancrowds.com/en/2015/04/supply-and-demand-in-bitcoin-economy/

What do you think?

The exchanges can create bitcoin out of thin air if they are dominating the exchange like MTGOX. But now, each exchange can only control a small part of coins, if they create too much coins and crash the market price, the arbitrager will rush in and buy and withdraw, cause they to buy back coins from other exchanges to deal with the withdraw (Their coins out of thin air are not possible to withdraw)

But you are right, exchanges works exactly like banks, they have the possibility to create coin out of thin air. That's the reason people should stick with P2P exchanges thus get rid of the middle man. My favorite is localbitcoins, you have zero risk of market manipulation by localbitcoins

[odolvlobo]

I am trying to understand how to evaluate the value of Bitcoin.
Its not that simple as it sounds. I have a feeling that Bitcoin value in the exchanges does not represent its value in the real economy.

The value of a bitcoin is different for each and every person, so saying that the price of a bitcoin doesn't represent its value is stating the obvious. The difference between price and value is that price is objective and value is subjective.

[freehorizon]

Yes, everyone has its own value for Bitcoin.
But, I am asking about market value.
I claim that market value of Bitcoin against the Dollar is determined by the amount of Bitcoins vs. the amount of Dollars in a specific market (this is obvious).
I think we are bascially dealing with two markets here. One market is inside the exchanges and the other is the real economy.
My, not so obvious, claim is that the market value of the Bitcoin against the Dollar is actually different between those two markets.

[odolvlobo]

Yes, everyone has its own value for Bitcoin.
But, I am asking about market value.
I claim that market value of Bitcoin against the Dollar is determined by the amount of Bitcoins vs. the amount of Dollars in a specific market (this is obvious).
I think we are bascially dealing with two markets here. One market is inside the exchanges and the other is the real economy.
My, not so obvious, claim is that the market value of the Bitcoin against the Dollar is actually different between those two markets.

Any difference would be minimal if the markets are liquid and efficient, especially since the exchange rates are generally used to price goods.

[freehorizon]

I am trying to understand how to evaluate the value of Bitcoin.
Its not that simple as it sounds. I have a feeling that Bitcoin value in the exchanges does not represent its value in the real economy.
I wrote a blog post about it: http://blog.leancrowds.com/en/2015/04/supply-and-demand-in-bitcoin-economy/

What do you think?

The exchanges can create bitcoin out of thin air if they are dominating the exchange like MTGOX. But now, each exchange can only control a small part of coins, if they create too much coins and crash the market price, the arbitrager will rush in and buy and withdraw, cause they to buy back coins from other exchanges to deal with the withdraw (Their coins out of thin air are not possible to withdraw)

But you are right, exchanges works exactly like banks, they have the possibility to create coin out of thin air. That's the reason people should stick with P2P exchanges thus get rid of the middle man. My favorite is localbitcoins, you have zero risk of market manipulation by localbitcoins

The exchanges can also create fiat money.
The P2P exchanges are exchanges which work in the real economy while the centralized exchanges work in their own economy.
My whole point was that the market value of Bitcoin against the Dollar is different between those two economies.