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Author Topic: Is there anyone smart enough to figure out how to compute the price of Bitcoin?  (Read 474 times)
Bitcoin Guy
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June 17, 2017, 01:54:32 AM
 #1

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh


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June 17, 2017, 02:10:29 AM
 #2

Each variable cannot be determined exactly and are you sure that only your variables matter Huh?
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June 17, 2017, 02:38:01 AM
 #3

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh


The "fair price of bitcoin" is established organically due price discovery through supply and demand. There's no mathematical formula to know the so called "fair price of bitcoin". If there was, you would be rich by selling and buying in relation to that price. We can only try to estimate the price by means of technical and fundamental analysis.

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June 17, 2017, 02:47:28 AM
 #4

No.

The price is subjective and can not be computed.

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June 17, 2017, 02:51:20 AM
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No because no one can take into account every country's political standpoint on bitcoins and even if they did sometimes bitcoins act the exact opposite way people expect it to.
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June 17, 2017, 02:55:01 AM
 #6

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh
There's a lot more involved than just that equation when it comes to comparing a currency that essentially has no use for required services (thinking utilities and the like) and when the currency is a small niche used by a very, very globalized population as opposed to a single country. You can't get a good read for the "V" variable because of this, making "P" extremely hard to find, and have it be accurate.
IIRC assuming you take the $2Quad into account you end up making each BTC worth something like $1XX million or whatever. I would have to run the numbers again but it's somewhere around there.
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June 17, 2017, 03:00:39 AM
 #7

Each variable cannot be determined exactly and are you sure that only your variables matter Huh?

I did not say only my variables matter and I did not come out with the equation.  I was only using the equation as a starter.  Any equations and variables that we can refer to are welcome.

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June 17, 2017, 03:07:41 AM
 #8

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh



I'd say it is as simple as that, most of the time the price of bitcoin it is due to speculation and that also happens with irl economy. Although I agree with some users that the variables are not the ones you should be using...

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June 17, 2017, 03:08:16 AM
 #9

Could the following equation be utilized?
MV = PT (the Fisher Equation)

no because Fisher's equation is used to get an estimation of interest rates , Cost–benefit analysis and stuff like that. not the value of something like bitcoin.

Quote
The Fisher equation in financial mathematics and economics estimates the relationship between nominal and real interest rates under inflation. ... In finance, the Fisher equation is primarily used in YTM calculations of bonds or IRR calculations of investments. In economics, this equation is used to predict nominal and real interest rate behavior.

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June 17, 2017, 03:12:13 AM
 #10

The "fair price of bitcoin" is established organically due price discovery through supply and demand. There's no mathematical formula to know the so called "fair price of bitcoin". If there was, you would be rich by selling and buying in relation to that price. We can only try to estimate the price by means of technical and fundamental analysis.

Well, I guess fundamental analysis is what I am looking for.  What are the major variables and how to formulate the model using the variables?

The availability of major altcoins, such as ethes, has to be one of the variables because it takes away market share.


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June 17, 2017, 03:15:03 AM
 #11

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

Bitcoin acts more as an asset rather than a real currency and such assets are speculative in nature. In order words there is no objective way to calculate it using a formula. You can however use and compare indicators in relation to historical levels such as the average value of transactions, average holding of wallets, number of wallets etc and see if their growth matches historical price increases.

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June 17, 2017, 03:19:27 AM
 #12

Each variable cannot be determined exactly and are you sure that only your variables matter Huh?
Exactly because the price of bitcoin its hard to find out its value. Even you are the smartest mathematician it will not be easy for you. Unlike the other type of money it has a fixed value so its easy to find out its price. 



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Bitcoin Guy
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June 17, 2017, 03:24:09 AM
 #13

Perhaps we can list out all the major variables that are quantifiable as a start.

For those who know statistics, perhaps, multiple regression model can be utilized.
Simulation can perhaps be used and, instead of getting a single estimated price, a probability distribution can be computed.  The outcome will look like 95% of chance the price is at $xxxx to $xxxxx.

Again, I am just saying; all the above suggestions may or may not be doable and may not be good enough.  I guess the price of Bitcoin, at the current stage, is not stable enough for a good pricing model to be developed.  The price right now has a lot to do with speculation.  

For those good students, professors, or FX analysts out there, is there a price model to estimate the value of the USD?


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June 17, 2017, 03:55:38 AM
 #14

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh


Since it is a big factor for the supply and demand of the particular coin to rise in the price but still here I don't think any formula will be apply in these things , it is because  the main thing in the price will be bid that is placed at the exchange site  .
Suppose the price of the Bitcoin is 2500$/btc but if anyone will place a buy order at 3000$ then its price will be 3000$ until the order has been completed .
So instead to develop a formula , or make confused himself , make a simple sense of only demand at the exchange or marketplace for that particular coin and also see the technology and security in the algorithm of the coin also ( if you want buy ) .

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June 20, 2017, 03:00:40 AM
 #15

Market prices might be a net sum of different variables.

Intelligence could be one factor determining price.

Emotion might be another. Future projections of economic data, fiat value, state debt and deficit and any number of other variables would factor in.

It may be safe to say smarts or intelligence aren't the only factor determining the value of things?

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June 20, 2017, 03:12:27 AM
 #16

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh



This equation does not include qualitative factors like how people perceive bitcoins, how they use it, is there more merchants accepting it, etc. So I don't think it can be quantified just by using such a formula. Maybe it could show a glimpse of what it could be valued at but not really anything concrete

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June 21, 2017, 10:44:32 AM
 #17

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh



This equation does not include qualitative factors like how people perceive bitcoins, how they use it, is there more merchants accepting it, etc. So I don't think it can be quantified just by using such a formula. Maybe it could show a glimpse of what it could be valued at but not really anything concrete

You're right. And the variables you're using also is subject to changes depending on a lot of factors as well. So simply put, we can only speculate the movement of btc's price but not really predict where it's gping to land exactly

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June 21, 2017, 06:33:55 PM
 #18

Is there anyone smart enough to figure out how to compute the fair price of Bitcoin?

Any ideas?  Suggestion must be quantifiable. 


Could the following equation be utilized?

MV = PT (the Fisher Equation)

Each variable denotes the following:
M = Money Supply
V = Velocity of Circulation (the number of times money changes hands)
P = Average Price Level
T = Volume of Transactions of Goods and Services

 Huh


If there is a formula that can calculate the fair price of bitcoin then many people get rich quick because it can learn the formula, So far no one can read the bitcoin price movement with the formula because bitcoin is a digital coin that follows the market price movement.

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June 21, 2017, 06:46:24 PM
 #19

If there is a formula that can calculate the fair price of bitcoin then many people get rich quick because it can learn the formula, So far no one can read the bitcoin price movement with the formula because bitcoin is a digital coin that follows the market price movement.

Some people will get rich, but not too many because once the pricing model is released everyone can jump in and do it and there will not be much advantage to be taken.

Also, such of a pricing model would probably only able to approximate the price.  One pricing model that I admire the most, for those who are interested, is the Black/Scholes Option Pricing Model.  It prices the fair value of an option.  It is accurate because if you run a simulation with 5,000,000 or more iterations with simulated stock price movement, the result would approximate the formulated price to the penny.  The model was built by finance PHDs and one of their wife who happened to have a PHD in physics.
 

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