New Bitcoin Valuation Using Experimental Economics

[johnyj]

What is the intrinsic value of electricity in 1400 ?

[1714032991]

1714032991

[myrkul]

What is the intrinsic value of electricity in 1400 ?

The value of electricity in the year 1400 was mostly negative. The main form it existed in was large static discharges (lightning) which caused fires, and killed people and trees unfortunate enough to be struck by them. Nobody wanted any electricity. In fact, pretty much everybody feared it. Thus, negative value.

[townf]

I'd say this hair has been pretty much split.

I'm going to reread the article now and substitute the words "intrinsic value" with the words "bling status", and see if that clears things up for me

[freedomno1]

Always good to see the knowledge here gotta love that bling value haha

[townf]

I would think some other important factors contributing to btc intrinsic value up (or down) are its use (or non-use) as a medium of exchange instead of a hoarding device, and its perceived or predicted legality (or illegality). These probably fall under what you were assigning 50% "use".

I realize trying to quantify demand due to perceived legality would almost entail quantifying conspiracy theory, but statistically quantifying further the intrinsic value due to its use as a medium of exchange might be easier or more empirical.

Could it be something like projecting the growth (or shrinkage) of the total market volume, scope, and variety of goods and services exchanged in btc and applying that as some kind of coefficient or factor?

I'm getting out of my league is why I'm asking. I'm trying to handicap this, you know, like the horse races.
 

[townf]

Always good to see the knowledge here gotta love that bling value haha

lol yeah definitely lot of brains here, but sometimes i need it simple   

[Theraty]

The Mineforman website (http://mineforeman.com) was kind enough to allow me to write a blog using an experimental economic method. The article is called "Bitcoin Valuation as a Fiat Hedge With Information and Substitution Effects" and can be found below:

http://mineforeman.com/2013/05/14/bitcoin-valuation-as-a-fiat-hedge-with-information-and-substitution-effects/

For my calculations I did some new research that no one else has done on the rate of dilution of BTC value from competition and some other stuff. Unfortunately the data pickings were slim so the projection has a fairly wide confidence interval but I'm still proud of the fact that it covers new territory. The article links to another article with a highly detailed breakdown of the methodology, even including a downloadable copy of the spreadsheet I used! What do yall think?

How accurate did you find the evaluation?

[Impaler]

All four of these points can basically be boiled down to this argument:

There is an ideal distribution of resources, and given perfect knowledge and perfect morality, the price of an item would always reflect that ideal distribution, and would therefore be it's intrinsic value.

I can't really argue with that, except to say that the "ideal" is variable, and mankind does not have perfect knowledge, nor perfect morality. Nor can you deduce what the market price would be in such a situation from any information in the real world.

All that you can know is that the price of an item will asymptotically approach the price it would have in that ideal, which, as I said, is itself a moving target.

I would like to add to this point by myrkul, the "Ideal distribution of resources" much like anarcho-communism is an unachievable state because of the numerous shortcoming myrkul lays out.  But if such a state were to exist it would by definition no longer have any need for prices at all.  Prices exist as corrective signals which communicate shortages and gluts, the perfect distribution thus no longer needs prices and would become pure exchange.  Nor would such a state have any innovation, changes in taste or preference or any opportunity for profit, arbitrage or investment.  In other-words it would be a dead wax-replica of the real world.  The OP's fault lies in trying to project Platonic ideals onto the economy and prices in particular as he creates the notion of an almost other-worldly perfect price of which our real prices are but pale shadows of on the back wall of a stock exchange.  Platonic ideals are deservedly one of the most repudiated concepts in the history of philosophy and projecting them onto prices is a gross absurdity.

[Theraty]

All four of these points can basically be boiled down to this argument:

There is an ideal distribution of resources, and given perfect knowledge and perfect morality, the price of an item would always reflect that ideal distribution, and would therefore be it's intrinsic value.

I can't really argue with that, except to say that the "ideal" is variable, and mankind does not have perfect knowledge, nor perfect morality. Nor can you deduce what the market price would be in such a situation from any information in the real world.

All that you can know is that the price of an item will asymptotically approach the price it would have in that ideal, which, as I said, is itself a moving target.

I would like to add to this point by myrkul, the "Ideal distribution of resources" much like anarcho-communism is an unachievable state because of the numerous shortcoming myrkul lays out.  But if such a state were to exist it would by definition no longer have any need for prices at all.  Prices exist as corrective signals which communicate shortages and gluts, the perfect distribution thus no longer needs prices and would become pure exchange.  Nor would such a state have any innovation, changes in taste or preference or any opportunity for profit, arbitrage or investment.  In other-words it would be a dead wax-replica of the real world.  The OP's fault lies in trying to project Platonic ideals onto the economy and prices in particular as he creates the notion of an almost other-worldly perfect price of which our real prices are but pale shadows of on the back wall of a stock exchange.  Platonic ideals are deservedly one of the most repudiated concepts in the history of philosophy and projecting them onto prices is a gross absurdity.

Whats your valuation/guesstimation of the bitcoin over the next year and what do you base this valuation on? I ask because you give a brilliant argument and sound like you know what your talking about?