Measure Value in Infrastructure Development not Price

[crazy_rabbit]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that while Bitcoin might have been driven primarily by speculation in the early days, that has changed significantly. At this point, Bitcoin infrastructure development (ASIC's, Services, Conferences, Technology,etc...) is growing at an ever increasing rate. This is how those nervous Bitcoin holders should be pricing the Bitcoins in their hands. The 'machine' of Bitcoin is getting only larger, more international, more decentralised.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

[LordMeowMeow]

People getting upset about the swings do not understand what they have invested in very well IMO. These swings are normal and I think your post highlights the importance of buying and holding in this case. Bitcoins are getting stronger every day, regardless of price.

[CompNsci]

Yes, the fundamentals in terms of business and transactions continue to look very good. The value (vs. price) continues to improve.

[lch]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that while Bitcoin might have been driven primarily by speculation in the early days, that has changed significantly. At this point, Bitcoin infrastructure development (ASIC's, Services, Conferences, Technology,etc...) is growing at an ever increasing rate. This is how those nervous Bitcoin holders should be pricing the Bitcoins in their hands. The 'machine' of Bitcoin is getting only larger, more international, more decentralised.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

If we already have adequate infrastructure, additional infrastructure will add little value. In order to increase the value of bitcoins, we need to get bitcoins into the hands of more people, and encourage people to use it rather than converting to fiat (if possible).

[QuestionAuthority]

Forex traders would disagree with you. The only way to value a currency is by price. Infrastructure matters in the fixing of price only as much as it creates faith in the currency.

Fundamental analysis studies the intrinsic value of a currency and uses indexes called economic indicators. Economic reports like GDP, CPI, retail sales, interest rates and industrial production help traders determine value. The value of Bitcoin can't be tracked this way.

Technical analysis of currency value can use the above indicators but also uses political stability, the reliability of paying debt, trade balances and demand for the currency as a commodity. This has little to do with infrastructure and everything to do with price. This is the only way to track Bitcoin.

People crudely speculating on current money flow or political circumstances are doing it right. They are attempting to use available knowledge to determine current value direction and make an informed trading decision.

[monsterer]

Forex traders would disagree with you. The only way to value a currency is by price. Infrastructure matters in the fixing of price only as much as it creates faith in the currency.

But Forex traders don't need to have faith that USD or GBP will succeed as a currency, therefore the point is a valid one. The more infrastructure that invests in bitcoin by accepting it, the more value that currency has irrespective of current price.

[Svennisen]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that while Bitcoin might have been driven primarily by speculation in the early days, that has changed significantly. At this point, Bitcoin infrastructure development (ASIC's, Services, Conferences, Technology,etc...) is growing at an ever increasing rate. This is how those nervous Bitcoin holders should be pricing the Bitcoins in their hands. The 'machine' of Bitcoin is getting only larger, more international, more decentralised.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

+1

While the value may shift up and down, in the long run it is the success of bitcoin as a real currency that matters. Simple, if bitcoins succeeds, the value will go up.


But I think many of us is in this simply because its awesomeness and not the potential to get rich.

[QuestionAuthority]

Forex traders would disagree with you. The only way to value a currency is by price. Infrastructure matters in the fixing of price only as much as it creates faith in the currency.

But Forex traders don't need to have faith that USD or GBP will succeed as a currency, therefore the point is a valid one. The more infrastructure that invests in bitcoin by accepting it, the more value that currency has irrespective of current price.

I understand that people want Bitcoin to succeed. I want it to succeed but he is talking about chatter in the speculation sub-forum. If you are here to make money trading the most important aspect for you is price and correctly guessing the next movement. Choosing the end or beginning of a bubble can make you money. You are going to have a hard time convincing speculators to care about small advances in infrastructure because watching those indicators, for now, is important but less so than major trade movement (sell offs) or reliability of pair trading with fiat.

[MPOE-PR]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that MP said 100 to 130 back early April and it's been 100 to 130 ever since.

This would be exactly correct.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

If you think infrastructure = conferences...heh.

[Dansker]

No wonder the price is dropping.

It seems price and this buddy are correlated: http://www.google.com/trends/explore#q=bitcoin&cmpt=q

What this means is, that on top of bitcoins intrinsic value is a layer of speculative value. That layer will fluctuate wildly, while the sound base layer will remain unaffected, or rather slowly grow at an organic rate (or slowly decay if you are a pessimist).

[crazy_rabbit]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that MP said 100 to 130 back early April and it's been 100 to 130 ever since.

This would be exactly correct.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

If you think infrastructure = conferences...heh.

conferences means educating larger number of people about bitcoin, proselytizing the bitcoin philosophy, building local bitcoin communities and creating new networks of individuals with a common goal. It's difficult to measure infrastructure directly but one can infer that if we go from one or two conferences a year to many local conferences all over the world it means that a greater number of people are interested in taking an active role in building bitcoin and it's infrastructure. It's an indirect measurement, but I think it's a valid one.  Just off the top of my head there was the San Jose conference, a Miami Meetup, a Bratislava Meetup (Which resulted in Bratislava becoming a top bitcoin accepting city for local businesses), a German meetup, Amsterdam, London, Prague last week, and that's just what I can think of off the top of my head. That's a good sign and indicative in progress in infrastructure. People are a valuable resource- the most valuable in terms of something like bitcoin.

As for fluctuation between 100 and 130, I think that's pretty accurate myself. $100 tends to be one of those psychologically magic numbers where things easily settle.

[benjamindees]

There's an interesting relationship between Bitcoin price and mining infrastructure.  I'm not sure you should include it in your argument.  It's the same relationship as between the value of a national economy and its level of military spending.  What we are seeing right now, more ASICs coming online, increases the infrastructure, the resistance to outside threats.  But it decreases the value of Bitcoin, at least in the short term, unless and until this investment in increased resistance attracts new participants or spurs economic growth.

"A weapon unused is a useless weapon."  -Spies Like Us

[crazy_rabbit]

There's an interesting relationship between Bitcoin price and mining infrastructure.  I'm not sure you should include it in your argument.  It's the same relationship as between the value of a national economy and its level of military spending.  What we are seeing right now, more ASICs coming online, increases the infrastructure, the resistance to outside threats.  But it decreases the value of Bitcoin, at least in the short term, unless and until this investment in increased resistance attracts new participants or spurs economic growth.

"A weapon unused is a useless weapon."  -Spies Like Us

good point- we could be seeing just more Bitcoin in the economy from people who need to repay their ASIC purchases- and we know in the past 12 months investments into ASIC have been very substantial. But of course the beauty of Bitcoin is that we all know that number of new BTC created is oh so time limited. :-)

[MPOE-PR]

People are a valuable resource- the most valuable in terms of something like bitcoin.

I think that's a common misconception. Selected people are the most valuable resource, much like selected earths are the most valuable resource. People generally are about as valuable as dirt generally.

conferences means educating larger number of people about bitcoin, proselytizing the bitcoin philosophy, building local bitcoin communities and creating new networks of individuals with a common goal.

I'll be a darling and not bitch about extraneous s's (this, incidentally, is a figure of speech, goes by the name apophasis) but I can't pass the remarkable "proselytizing the philosophy". This is also a figure of speech, you name it.

So here's the thing: unless the "Bitcoin philosophy" is rampant Icandoeverything mixed with Thisisthesecretbankershate-howaretardmadebazillions, with the obvious heap of Imascammerhearmeroar piled on top (look here, and here) I have no idea what exactly you imagine these conferences are proselytizing.

A nice place for Jared Kenna to go pretend he didn't scam the users of the (at the time) second largest exchange (seriously, what happened to the Dwolla lawsuit?), as if that does anything. A nice place for Vehehes to pretend like the "Bitcoin Foundation" has anything to do with Bitcoin, and that it's ok for the unelected president to be the unelected secretary, and that it's okay to use donation funds to prop his own private ventures, and so on and so forth. A nice place for retards that can't read code but love to write (bad, useless, buggy code) to go and snort together over lifesize anorexic 16yos drawn on posters and pillows. Seriously man, snap out of it. Conferences measure nothing and never have.

It's difficult to measure infrastructure directly

No, actually, it's not. Looky here. Do the math of what exactly those numbers mean and you might suddenly realize why your agreeing with what MP says is moot, and why your considerations of "magic numbers" are wholly out of place.

This isn't a magic numbers game, we're not all fuzzy inside and magically equally entitled and equally important. The whole "every man's a vote" or "everyone has a soul" and gathering together to wait for catered meals doesn't change the world.

Infrastructure is extremely easy to measure, and accurately. The problem is that most nobody wants to either do it or see it done, and this is because of the dirt generally issue above. It's unflattering to the cherished delusions of the crowd.

[crazy_rabbit]

People are a valuable resource- the most valuable in terms of something like bitcoin.

I think that's a common misconception. Selected people are the most valuable resource, much like selected earths are the most valuable resource. People generally are about as valuable as dirt generally.

conferences means educating larger number of people about bitcoin, proselytizing the bitcoin philosophy, building local bitcoin communities and creating new networks of individuals with a common goal.

I'll be a darling and not bitch about extraneous s's (this, incidentally, is a figure of speech, goes by the name apophasis) but I can't pass the remarkable "proselytizing the philosophy". This is also a figure of speech, you name it.

So here's the thing: unless the "Bitcoin philosophy" is rampant Icandoeverything mixed with Thisisthesecretbankershate-howaretardmadebazillions, with the obvious heap of Imascammerhearmeroar piled on top (look here, and here) I have no idea what exactly you imagine these conferences are proselytizing.

A nice place for Jared Kenna to go pretend he didn't scam the users of the (at the time) second largest exchange (seriously, what happened to the Dwolla lawsuit?), as if that does anything. A nice place for Vehehes to pretend like the "Bitcoin Foundation" has anything to do with Bitcoin, and that it's ok for the unelected president to be the unelected secretary, and that it's okay to use donation funds to prop his own private ventures, and so on and so forth. A nice place for retards that can't read code but love to write (bad, useless, buggy code) to go and snort together over lifesize anorexic 16yos drawn on posters and pillows. Seriously man, snap out of it. Conferences measure nothing and never have.

It's difficult to measure infrastructure directly

No, actually, it's not. Looky here. Do the math of what exactly those numbers mean and you might suddenly realize why your agreeing with what MP says is moot, and why your considerations of "magic numbers" are wholly out of place.

This isn't a magic numbers game, we're not all fuzzy inside and magically equally entitled and equally important. The whole "every man's a vote" or "everyone has a soul" and gathering together to wait for catered meals doesn't change the world.

Infrastructure is extremely easy to measure, and accurately. The problem is that most nobody wants to either do it or see it done, and this is because of the dirt generally issue above. It's unflattering to the cherished delusions of the crowd.

Sometimes otherwise smart people say profoundly stupid things.

[BitAddict]

In the speculation threads people are crying over the drop in price as though 'this is the end'. I'd like to point out that while Bitcoin might have been driven primarily by speculation in the early days, that has changed significantly. At this point, Bitcoin infrastructure development (ASIC's, Services, Conferences, Technology,etc...) is growing at an ever increasing rate. This is how those nervous Bitcoin holders should be pricing the Bitcoins in their hands. The 'machine' of Bitcoin is getting only larger, more international, more decentralised.

Measure the value of a Bitcoin by the infrastructure and people behind it- and it's only going up. How many conferences/meetups are there this year? 10+? It's incredible. I couldn't be more excited.

I completely agree with you.
If yesterday bitcoin was $120 and today is $85 is just stupid value, since it is still the same.
Is better just to forget the short time value, and start developing and spreading the word.

[MPOE-PR]

Sometimes otherwise smart people say profoundly stupid things.

Sure. Alternatively, otherwise intelligent people end up acculturated into ridiculous nonsense with the amusing result of considering plain sense "profoundly stupid" on the grounds that it's profoundly threatening to baseless but nevertheless deeply held beliefs.

[flix]

Fast rule of thumb:

Nº of users x $XXX = BTC Bitcoin market cap

Where
$XXX = average demand for BTC cash balances in $

In other words how much $ value are users, on average, willing to hold in BTC.

At present I would estimate
nº of users:   2-3 million
$XXX:          $100-1000


So the "reasonable" mkt cap for Bitcoin would be between (2m x $100) and (3m x $1000):
$200 Mn - $3 Bn.

Given 11 million BTC in circulation that would give us a BTC "fair price" range of

$18-272

It's a pretty wide range!
But if you want to narrow it down you can, by calculating more accurate and narrow estimates for the components of this equation.

A decent estimate of nº of users could probably be made by adding client downloads and the nº of users of the top 5-10 online wallet services.

The only way to estimate $XXX (other than a  survey of bitcoiners with a statistically relevant sample size) would probably be to pick a time period of relative price stability (at least 2 months of BTC price trading in a narrow range) and divide mkt cap during that time by estimated nº of users at that time. We can assume that any BTC balances held by users for an extended period is good evidence of those users being comfortable with holding that $ value in BTC (on average).

[flix]

Forex traders would disagree with you. The only way to value a currency is by price. Infrastructure matters in the fixing of price only as much as it creates faith in the currency.

Fundamental analysis studies the intrinsic value of a currency and uses indexes called economic indicators. Economic reports like GDP, CPI, retail sales, interest rates and industrial production help traders determine value. The value of Bitcoin can't be tracked this way.

Technical analysis of currency value can use the above indicators but also uses political stability, the reliability of paying debt, trade balances and demand for the currency as a commodity. This has little to do with infrastructure and everything to do with price. This is the only way to track Bitcoin.

People crudely speculating on current money flow or political circumstances are doing it right. They are attempting to use available knowledge to determine current value direction and make an informed trading decision.

Your definitions are wrong. Sovereign debt risk, trade balances and demand to hold cash balances in that currency are all FX fundamentals, together with other economic indicators. Technical Analysis is used a lot in forex, but technical indicators are mostly chart-related (see http://www.investopedia.com/terms/t/technicalanalysis.asp).

Also I don't see why the GDP of the Bitcoin economy can't be estimated, just as the GDP of many small countries are. In fact it should be easier, since the blockchain is public, whereas national accounting statistics miss out on a lot of stuff.

You can try it: http://en.wikipedia.org/wiki/Gross_domestic_product#Determining_GDP

Another, perhaps more interesting question would be... what is the point? GDP is a relatively useless statistic anyway. Much better to have the transaction volume (https://blockchain.info/charts/estimated-transaction-volume) or the transanction fees paid (https://blockchain.info/charts/transaction-fees) that will give you a really good idea of the Bitcoin economy's flow, size and growth.

Believe me, if economists (and traders) could have these kind of real time statistics on the US economy, they would not give a damn about crappy, government-estimated GDP.

[flix]

As for "infrastructure"... it's nice to have a new bridge.. but the fact that it exists is not as useful in estimating value as statistics on how much traffic it carries. Toll roads are perfect for this because you can tell if it was worth it by seeing the operating businesses' profitability.

So it's nice to know that Bitinstant has "700.000 BTC points of sale" or "MSB licenses in 30 states" but the really useful information is how many people are actually using their $-BTC bridge (and paying at their toll booth). If Bitinstant, Coinbase or Mt.Gox are profitable and keep growing, other companies will emerge to copy their business models and build more roads. Or they themselves will build more bridges in other countries.