How to determine real value of 1 bitcoin?

[Come-from-Beyond]

Right now 1 BTC = 11.70 USD on MtGox. But value of 1 USD is changed every day due to inflation and politics.

I've seen topics with discussion "when 1 BTC will worth 1000 USD". But what the point? When this happens 1000 USD could be equal to 5 "nowadays" USD. Any ideas how to determine real value of a bitcoin? I suspect it is 1 BTC. In other words Bitcoin should be used as determinant of "value".

PS: MtGox lets to sell and buy bitcoins but don't u think something is incorrect in this point of view? Let's look at MtGox as a service to buy and sell USD and other fiat currencies for bitcoins. If we change our point of view this way, we'll act accordingly and will likely lead the whole world to the point when Bitcoin becomes the determinant of value.

[DeathAndTaxes]

BTC won't have a defined BTC value until most of the supply chain is in BTC.  Thinking otherwise is just wishful thinking.

Say I have a store that sells xboxes.  My wholesale price is $200 and current retail price is $300.  Obviously I can't sell them for less than $200 and they probably aren't going to sell if the price is more than $300.

I can't simply pretend BTC has a static demand and say xboxes 20 BTC.  If USD:BTC is less than $10 well I am selling them below cost and if USD:BTC is more than $15 customers would be better off just exchanging their BTC for USD and buying one from a USD xbox retailer.

On a more meta level saying 1 BTC buys this game worth $20 isn't much different than an exchange saying the current exchange rate is 1BTC = $20USD.  Money isn't wealth.  Wealth is what you can buy with money. Money is simply an accounting mechanism (who has how much wealth) and thus conversion rates are inevitable.  If I say I will give you 1 oz of gold for your mining rig, you would do some conversion to determine if that is a good deal or not.

[Gabi]

Compare it with gold. Or with things you can buy. Food. Computer Hardware, and so on.

[markm]

People keep getting seduced by all the goodies being offered for fiat, and throwing away their bitcoins for a pittance.

There are lots of people who do think bitcoin is valuable and thus are not willing to spend it until some day when they will be able to get their bitcoin's worth for it instead of being offered insultingly low prices for it.

Its as if the fiat folk think we bitcoiners are a bunch of idiots who have no idea how much a twentyone-millionth of a reasonably sized market actually adds up to; they are trying to get them off of us dirt cheap on the excuse that they don't cost much to create. So basically they are trying to keep our attention on the supply side, oh look, it costs less than three digits in dollars to make a bitcoin. But that is only because supply is right now, the boom years when bitcoins virtually fall off of trees, it is raining bitcoins right now. Demand, on the other hand, is in a few decades when these windfalls people are virtually giving away now will be our inheritances passed on to our posterity.

If only twentyone million people used bitcoin and only to buy a morning coffee on their way to work each day how likely is it the coffee grower will sell the bitcoins back to them instead of sending it off to a coffee grower to order up more varieties of beans, and to the landlord they rent their retail space from and such?

What happens when fortytwo million people choose to buy their morning coffee with bitcoin?

Just make up your own mind what your bitcoins are going to have to be buying you in the way of a retirement lifestlye and don't part with them for less than that!

(Only got one bitcoin right now? DIvide that by the number of retirement years you want to live, presto, that is how much one bitcoin is worth. Got two? Lucky you, bitcoins are worth half as much to you, you can afford to blow one on a trip round the world before you retire... Got three? You are rich! You can send your kids through college and still get that trip round the world before you retire. Got four? Wow, an education fund for the grandkids on top of all that! Etc... )

-MarkM-

[Ivica]

Compare it with gold. Or with things you can buy. Food. Computer Hardware, and so on.

https://en.wikipedia.org/wiki/Big_Mac_Index
I wonder, if you can actually compare bitcoin's value with food. Since bitcoin is pretty much international, probably gold and other metals are good to compare to.

[markm]

In fairness, I can also see how/why some folk might choose to consult the Pet Rock index instead...

-MarkM-

[barbarousrelic]

The only way to determine the real value of 1 bitcoin is to auction it to the highest bidder.

[kjj]

The concept of value doesn't really have a fixed meaning outside of the moment of sale.

If you buy a bitcoin for $11.70, you are saying that at that instant, a bitcoin is worth not less than $11.70 to you.  And the seller is saying that a bitcoin is worth not more than $11.70 to him at that instant.

And both of those statements are really duals, they also tell you something about the relative valuations of dollars in the minds of the buyer and the seller.  This is because value is always relative, and always in flux.  Right now, dollars (Euros, Pounds, Yen, whatever) have the advantage that we think of value in those terms, by default, and out of habit and convenience.  Bitcoin has a lot of growing to do before it can take over that role as the default unit of account.

[markm]

The only way to determine the real value of 1 bitcoin is to auction it to the highest bidder.

Nonsense! The proper way is wait until all the folks auctioning them off have run out, then observe that the one the bidders failed to bid high enough to convince you to sell is obviously worth more than any of them actually bid, if only to you...

-MarkM-

[Gyrsur]

the value of Bitcoin is based on the soundness of the Bitcoin network and the effort to create one bitcoin.

maybe to be measured with the amount of transactions and the network hashrate...

[barbarousrelic]

the value of Bitcoin is based on the soundness of the Bitcoin network and the effort to create one bitcoin.

maybe to be measured with the amount of transactions and the network hashrate...

And what equation would you use to translate transactions and hashrate into dollars?

[markm]

Bitcoin has a lot of growing to do before it can take over that role as the default unit of account.

Well yes, of course, obviously.

Just trying to use bitcoin as a unit of account for accounting something tiny and local such as the current price/value of the downtown of a small or medium sized city, let alone a more reasonable sized local matter such as assessing the value in bitcoins of all the taxable property in the city and its associated/surrounding county you should immediately realise that it at first glance seems to add up to to many many many more bitcoins than will ever exist, thus that actually, come to think of it, something about that just doesn't add up...

-MarkM-

[macsga]

The proper way is wait until all the folks auctioning them off have run out, then observe that the one the bidders failed to bid high enough to convince you to sell is obviously worth more than any of them actually bid, if only to you...

-MarkM-

True. When the demand for bitcoins will rise (and it WILL rise since FED and EU are making money), then no fiat currency will be able to compete to it. That's the basic idea of its existence...

 Miner or investor; I'd advise everyone to keep a decent amount of BCs in their wallet. You never know (actually you do; but anyway)...

[Gyrsur]

the value of Bitcoin is based on the soundness of the Bitcoin network and the effort to create one bitcoin.

maybe to be measured with the amount of transactions and the network hashrate...

And what equation would you use to translate transactions and hashrate into dollars?

to complex to find the real value of one bitcoin compared to US$. to many variables. it's not so easy to compute it. Bitcoin is a world on its own. difficult enough to messaure value of currencies against each other. for this there are also market exist. the only way is to approximate the value with market. demand and supply.

EDIT: one variable could be the future of Bitcoin. maybe it is priced in already in the value at the moment.

EDIT2: demand out from the dark net is also one variable. as I mentioned no chance to meassure it. only to approximate the value by market.

[kjj]

Bitcoin has a lot of growing to do before it can take over that role as the default unit of account.

Well yes, of course, obviously.

Just trying to use bitcoin as a unit of account for accounting something tiny and local such as the current price/value of the downtown of a small or medium sized city, let alone a more reasonable sized local matter such as assessing the value in bitcoins of all the taxable property in the city and its associated/surrounding county you should immediately realise that it at first glance seems to add up to to many many many more bitcoins than will ever exist, thus that actually, come to think of it, something about that just doesn't add up...

-MarkM-

Yes, but keep going.

There are not enough dollars to purchase the United States in a single transaction either.

An increase in value will likely happen while bitcoin is growing up, but what really needs to happen is for longer supply chains to operate with bitcoin.  If the dollar rises in value against foreign currencies by 10%, but don't see a 9% reduction in the prices of most things, because most things are insulated by many steps from foreign exchange.  Most bitcoin transactions are at most a step or two away from another currency, so swings in exchange rate have an immediate effect on prices.

[markm]

This is why having a multitude of alternative currencies can be helpful, since not all of them need be so closely tied to fiat; at least some of them can delegate the whole can of worms that is "the interface with fiat" to bitcoin.

Part of why the Canucks, Martians, Brits, (Galactic) United Nations and so on felt they had to issue their own coins was precisely to be able to take a step away from fiat, enhancing the value of bitcoin by making bitcoin the primary gatekeeper between the fiat currencies realm and the alternative currencies realm. A lot of the alternative blockchain currencies like to throw up an exchange where people can dump them for fiat, but some saw the value in bitcoin as a layer of insulation from the whole fiat realm. In fact from the figures at http://galaxies.mygamesonline.org/digitalisassets.html it looks to me as if eagerness to dump your coins for fiat leads to a lowering of value of the coin being so eagerly dumped.

-MarkM-

[evoorhees]

"Value" can really only be expressed as an exchange rate between one good and another. How much is a loaf of bread worth? Or a car, or a bottle of beer?

To answer that, you need to express it as an exchange rate. 1 loaf of bread might be worth 2 socks. Another person might value the loaf at 3 socks. Whomever brings the best exchange offer to the seller will get the trade so long as the exchange rate is acceptable to the seller. This is called a price. The price of a loaf of bread is 3 socks, at the point of the trade.

Bitcoin is no different. The value of a Bitcoin can only be expressed as an exchange rate with other objects. Originally, 10,000 bitcoins were exchanged for 2 pizzas, and thus an exchange rate - a market price - was established. That price has since changed, but in all cases the value of a Bitcoin is expressed in terms of other goods (usually, the other good is dollars, since dollars are the most commonly used barter asset, aka money).

So to answer the OP's question, how to determine the real value of a Bitcoin? Just look at what the prevailing exchange rate is. That's the answer, and it's no more complicated than that.

Some have suggested that Bitcoin should not be traded for fiat monies like dollars, and that they should have a value "of their own." This is impossible. It is impossible because if Bitcoin has its own value - let's say 1btc equals 20 loaves of bread - then we need merely ask what 20 loaves of bread equals in dollars, and we then reestablish an exchange rate between bitcoins and dollars.

tl;dr - the real value of 1 bitcoin is whatever you can exchange it for, and this will always be the case. No asset can be separated from its exchange rate with other assets.

[Gyrsur]

"Value" can really only be expressed as an exchange rate between one good and another. How much is a loaf of bread worth? Or a car, or a bottle of beer?

To answer that, you need to express it as an exchange rate. 1 loaf of bread might be worth 2 socks. Another person might value the loaf at 3 socks. Whomever brings the best exchange offer to the seller will get the trade so long as the exchange rate is acceptable to the seller. This is called a price. The price of a loaf of bread is 3 socks, at the point of the trade.

Bitcoin is no different. The value of a Bitcoin can only be expressed as an exchange rate with other objects. Originally, 10,000 bitcoins were exchanged for 2 pizzas, and thus an exchange rate - a market price - was established. That price has since changed, but in all cases the value of a Bitcoin is expressed in terms of other goods (usually, the other good is dollars, since dollars are the most commonly used barter asset, aka money).

So to answer the OP's question, how to determine the real value of a Bitcoin? Just look at what the prevailing exchange rate is. That's the answer, and it's no more complicated than that.

Some have suggested that Bitcoin should not be traded for fiat monies like dollars, and that they should have a value "of their own." This is impossible. It is impossible because if Bitcoin has its own value - let's say 1btc equals 20 loaves of bread - then we need merely ask what 20 loaves of bread equals in dollars, and we then reestablish an exchange rate between bitcoins and dollars.

tl;dr - the real value of 1 bitcoin is whatever you can exchange it for, and this will always be the case. No asset can be separated from its exchange rate with other assets.

good explanation, but what is then the value of ethics for example? 

[Gyrsur]

...
tl;dr - the real value of 1 bitcoin is whatever you can exchange it for, and this will always be the case. No asset can be separated from its exchange rate with other assets.

+1 and saves me a whole load of typing

....
good explanation, but what is then the value of ethics for example?  

Ethics as in supporting your local economy or something different?

and what is the value as an exchange rate as explained?

EDIT: it has a value or hasn't it?

[markm]

good explanation, but what is then the value of ethics for example?  

You're soliciting bids? Sheesh don't be so coy, just tell us outright your price (for doing something unethical...)

-MarkM-