I wanted to open up some discussion on determining the true value of a bitcoin. Rather than just taking a stab in the dark guess at what we want or think it should be, I propose we try to justify a true value. Of course this will be changing as time goes on.
I will kick it off and try to show methods to find a value, please jump in and tell me what I am missing or should include...
My thinking and assumptions are based on limited experience with the bitcoin market, and I dont have the time or wish to study it in-depth at the moment...
Ok first we need to know who the market participators are:
As far as I can tell we have:
- Day Traders
- Manipulators (mtgox, bitcoin owners)
- Illegitamate traders (money launderers, drug dealers)
Now we should try to see what price each participator wants from bitcoin.
The miners (significant) have invested a lot of up-front money to buy equipment. They are also paying running costs and will have some down time. So we need to find the current average cost to generate 1 bitcoin. (I am hoping some more informed members can jump in and help with some figures).
Then lets say that because of the uncertainty of bitcoin atm, miners are probably looking to pay off their original outlay in say 2 months.
Then we should take into consideration future difficulty increases withing this 2 month period and the affect this will have on the cost of generating a single bitcoin.
Put all this together and this will give us a base figure for what they would need bitcoin to sell at in usd.
Now miners will have a considerable affect on the price, since if the current price is less than this base figure, they will most likely not sell and hold onto their bitcoins. This will push price higher as there is reduced supply. So if we can get as accurate as possible on the miners than we can have some idea of where price is heading.
This process need to be done for each participator to give even more bias towards a direction and price.
I will come back to this if there is some interest in what I am trying to do here, but hopefully it has given a platform to take this further.