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Author Topic: How to determine real value of 1 bitcoin?  (Read 14268 times)
Gyrsur
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September 15, 2012, 04:38:52 PM
 #21

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

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

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September 15, 2012, 04:51:44 PM
 #22

the real value is exactly the average of everyone who gives you something in the real world for one bitcoin.
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September 15, 2012, 04:52:15 PM
 #23

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

That is hard to answer, maybe impossible.

But the principle is the same.  The value of ethics is how much a person is willing to sell theirs for.  But remember, they are selling their ethics, not yours.  They are likely to violate your ethics for much less than they are willing to violate their own.

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September 15, 2012, 05:24:25 PM
 #24

Only way is to chose some bunch of goods (lots of them and representative) and count value like inflation is calculated.

http://en.wikipedia.org/wiki/Inflation
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September 15, 2012, 05:25:03 PM
 #25

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

That is hard to answer, maybe impossible.

But the principle is the same.  The value of ethics is how much a person is willing to sell theirs for.  But remember, they are selling their ethics, not yours.  They are likely to violate your ethics for much less than they are willing to violate their own.
Ethics (from the Greek word: "Ηθική") is something that most people hold in their pants. As per its value; is like bitcoin's. It depends on who's asking (and how much). It's an open market after all... Grin

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September 15, 2012, 05:27:59 PM
 #26

"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?  Wink

"Ethics" is not a good or service. My explanation of values applies only to goods/services.
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September 15, 2012, 06:59:16 PM
 #27

The value of a Bitcoin can only be expressed as an exchange rate with other objects.

I'm unable to buy a loaf of bread for bitcoins now (socks neither). But I still don't think that 1 BTC = 0 USD. Something wrong in ur arguments...
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September 15, 2012, 07:20:17 PM
 #28

The value of a Bitcoin can only be expressed as an exchange rate with other objects.

I'm unable to buy a loaf of bread for bitcoins now (socks neither). But I still don't think that 1 BTC = 0 USD. Something wrong in ur arguments...

Hi arguments are 100% correct. If you cannot buy anything with bitcoins nor transfer them to fiat, then yes 1 BTC = 0 USD. However, many people have figured out how to purchase goods with BTC or exchange BTC for fiat. To those people, a bitcoin is worth ~ the MtGox exchange price give or take some fluctuations.

If you don't know how to do it, then yes a BTC = 0 for you but worth something to someone else, I suggest you sell it to them for the $0 it is worth to you.

Value is ALWAYS relative (to the individual, market, and time frame.
Come-from-Beyond
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September 15, 2012, 07:36:17 PM
 #29

What if I was unable to buy USD for BTC to buy loaf of bread? It wouldn't mean that 1 BTC = 0 USD. People's expectations set 90+% of bitcoin's value.
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September 15, 2012, 07:40:26 PM
 #30

People's expectations set 90+% of bitcoin's value.
absolutely true! if you leave expectations behind value would be lower than 1 US$ because there is almost no economy with Bitcoin.

EDIT: the 2 US$ low was the barrier downwards because people expect a future of Bitcoin and there was no general major issue with Bitcoin itself in the past.
Gyrsur
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September 15, 2012, 07:59:38 PM
 #31

People's expectations set 90+% of bitcoin's value.
absolutely true! if you leave expectations behind value would be lower than 1 US$ because there is almost no economy with Bitcoin.

EDIT: the 2 US$ low was the barrier downwards because people expect a future of Bitcoin and there was no general issue with Bitcoin itself in the past.

I disagree. Even if you could never purchase anything directly with Bitcoin, as long as you can exchange it for other currencies, it would have massive value solely as a store of value. The longer the protocol continues unharmed, this more this value will increase. This doesn't require any expectations other than being certain that my Bitcoins will be secure in the block chain and someone other than myself values them for the same reason.

I disagree too. Your scenario implied the expectation that a exchange have to exist in the future to change your no value BTC to fiat currency and in that moment if the exchange exist BTC will get value.

EDIT: assuming no BTC exchange will exist and no BTC economy will exist. what will then the value of BTC be? going to zero because Bitcoin was not created to end in itself.
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September 15, 2012, 08:00:32 PM
 #32

I disagree. Even if you could never purchase anything directly with Bitcoin, as long as you can exchange it for other currencies, it would have massive value solely as a store of value. The longer the protocol continues unharmed, this more this value will increase. This doesn't require any expectations other than being certain that my Bitcoins will be secure in the block chain and someone other than myself values them for the same reason.
My thoughts exactly.

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September 15, 2012, 08:06:06 PM
 #33

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

Seems to be true.
Gyrsur
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September 15, 2012, 08:10:51 PM
 #34

People's expectations set 90+% of bitcoin's value.
absolutely true! if you leave expectations behind value would be lower than 1 US$ because there is almost no economy with Bitcoin.

EDIT: the 2 US$ low was the barrier downwards because people expect a future of Bitcoin and there was no general issue with Bitcoin itself in the past.

I disagree. Even if you could never purchase anything directly with Bitcoin, as long as you can exchange it for other currencies, it would have massive value solely as a store of value. The longer the protocol continues unharmed, this more this value will increase. This doesn't require any expectations other than being certain that my Bitcoins will be secure in the block chain and someone other than myself values them for the same reason.

I disagree too. Your scenario implied the expectation that a exchange have to exist in the future to change your no value BTC to fiat currency and in that moment if the exchange exist BTC will get value.

Well I don't need an "exchange" to exchange Bitcoins. I simply need someone else to value them as I do.


it is then an exchange because you will not change BTC against BTC with this other person. it is an exchange or a part of BTC economy because you will change BTC against goods or services.
maqifrnswa
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September 15, 2012, 08:22:27 PM
 #35

What if I was unable to buy USD for BTC to buy loaf of bread? It wouldn't mean that 1 BTC = 0 USD. People's expectations set 90+% of bitcoin's value.

Why is a corporate bond worth anything? Because people expect it to remain to be worth something in the future. You can't buy a loaf of bread with a corporate bond either, and people expectations (that it will be repaid with interest) set 100% of the value.
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September 15, 2012, 09:07:59 PM
 #36

What if I was unable to buy USD for BTC to buy loaf of bread? It wouldn't mean that 1 BTC = 0 USD.

If you were selling to a global market, and nobody would give you anything for a Bitcoin, that is precisely what it would mean: 1 BTC = $0

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
Gyrsur
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September 15, 2012, 09:15:06 PM
 #37

What if I was unable to buy USD for BTC to buy loaf of bread? It wouldn't mean that 1 BTC = 0 USD.

If you were selling to a global market, and nobody would give you anything for a Bitcoin, that is precisely what it would mean: 1 BTC = $0

exactly! If you fork Bitcoin to Bitcoin2 and go to market "nobody would give you anything for a" Bitcoin2 because nobody expect a value of it in the future.
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September 15, 2012, 10:42:17 PM
 #38

This sounds much better than the silly assertion that the right this moment highest bid is the value, since somehow in the days before 24/7 trading stocks and bonds didn't drop to zero value during the hours exchanges were closed nor did money drop to zero value outside of business hours (except maybe in munchies-value to middle of the night stoners thinking the stuff is useless since it cannot buy munchies right now).

Isn't this part of what the concept of "liquidity" is about?

Just because I cannot sell a hundred million dollar estate at midnight in the middle of a bank holiday weekend doesn't mean the estate is worthless, it just means such estates have somewhat less liquidity than, say, munchies or hits of "acid"...

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barbarousrelic
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September 15, 2012, 10:57:51 PM
 #39

This sounds much better than the silly assertion that the right this moment highest bid is the value, since somehow in the days before 24/7 trading stocks and bonds didn't drop to zero value during the hours exchanges were closed nor did money drop to zero value outside of business hours (except maybe in munchies-value to middle of the night stoners thinking the stuff is useless since it cannot buy munchies right now).

Isn't this part of what the concept of "liquidity" is about?

Just because I cannot sell a hundred million dollar estate at midnight in the middle of a bank holiday weekend doesn't mean the estate is worthless, it just means such estates have somewhat less liquidity than, say, munchies or hits of "acid"...

-MarkM-


Well, in a narrow sense, for example, if you need medicine right now or you're going to die, and no one who has medicine is accepting Bitcoins/dollars/whatever, the Bitcoins/dollars/whatever are completely worthless. In a broader sense they are worth what they would sell for when more bidders are in communication with you (if there are indeed more bidders somewhere else)


This example also details how value is different for each person - there is no "real value" as the thread title suggests. If the person needing the medicine right now can't get anything for his Bitcoins, they are worthless to him, but if someone who doesn't need medicine can wait to sell them for other valued things, the Bitcoins are of great value to him.

Do not waste your time debating whether Bitcoin can work. It does work.

"Early adopters will profit" is not a sufficient condition to classify something as a pyramid or Ponzi scheme. If it was, Apple and Microsoft stock are Ponzi schemes.

There is no such thing as "market manipulation." There is only buying and selling.
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