What is Bitcoin's fair value?

[webtricks]

The basis of determining true value without going much deeper in Economics is by taking average of prices worldwide.
As Bitcoin has negligible real value (not zero because of some degree of utility), the only basis of determining value is what buyers wanna pay for it. The demand may differ worldwide due to different outlook and circumstances in different countries. So it is always better to average prices of different nations.

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[filharvey]

Its true that bitcoin does not have any intrinsic value since it is not backed by gold or any other asset.
But in other words,it could be even said that it is invaluable since no one could fix a maximum price limit for it.
Some even compare it with tulip.But tulips were traded in just contracts without even holding them which made its trade to collapse.But,bitcoin is verified.

3. Hurdle rate - Rate of return required to compensate for the risks associated with holding Bitcoin. Yeah, technopolitical hurdles or backlash from a country can have an impact on Bitcoin's expected value.

We recently saw that even china,the once dominant ruler in bitcoin world could not have an impact on bitcoin's price and progress.So,bitcoin's price could not be affected by such factors.

Bitcoin's price could not be calculated based on its mining cost.If it has to be calculated this way,then what would be the fair value of gold today?Its fair value would be very less and its today's price is also a speculated price based on the increase in demand for it.

[wantjokull]

That is no wonder why bitcoin is having so much price at the movement. According to your speculation or the article read bitcoins monetary base value is dependent on the terminal value which is also the same thing as competing with market cap value.


It will keep growing in the same way as the traditional assets do and will depend on the same things. It only differs with the decentralisation nature which different thing. That has some percentage of effect on deciding price of bitcoin because it gives freedom of investing into bitcoin.

[sportis]

if it were to be equal to gold then it must 111 trillion dollars market cap.

I think the topic want to compare the valuable of bitcoin and gold per unit not the marketcap.

OP does not asked that. But if we see bitcoin not only as currency but as commodity too, then why not think the market cap?

[SixOfFive]

We can't really determine BTC fair value coz its value depend upon what buyer want to pay for it. Due to limited supply and increasing demand BTC value seems to be increasing day by day. There is no set rules and regulations that can fix price cap on it so every price is fair for BTC.

[aardvark15]

The fair value of Bitcoin is what others are willing to pay for it. Right now people are willing to pay about $7000 for a Bitcoin, so that is what it is truly worth. Bitcoin and most other cryptocurrencies are valued by the free market because no government or business owns them (except for possible institutional investments). To me this means that the price is accurate most of the time. The exceptions would be when a whale pumps the price and then dumps the coin or some other manipulation of the price.

[Bolt Brownie]

That's the million dollar question right there, that no one knows how to give an exact answer. It's impossible to define a value for bitcoin, and that's why we have so many divergent opinions about it. Some say it's a bubble, because they see no value in it, others say that anything bellow $100k is cheap, because of it's potencial. Bitcoin value will always be defined by supply/demand model just like anything else. Right now, we all see the potencial of bitcoin, both as an asset or as a currency, and we all expect mass adoption some day, and that gives a lot of perceived value to the coin. If bitcoin does not fail technologically, and is not struggled by regulation, then it will most likely achieve it's goals and it's price will be huge because it's scarce. So yes, bitcoin right now has a perceived value based on hope

[BartS]

Trying to find bitcoin fair value is just another form to speculate with the price, the truth is the most simple of the rules that took economist centuries to discover is the only true way to find the price of bitcoin and that happens every day, supply and demand, the price of bitcoin has been going up for months and it is simple to understand that the demand for bitcoin has increased due to many reasons like the forks and the recent upgrade in the network.

[roddy5]

We really can't say or identify a fair value for the coin because it doesn't have any thing to promise in return right now. also it is hard to set a fair value because it doesn't reached the maximum price that it can have. We don't even know if what is the future of the coin if it will really replace the fiat system, if this happens then a fair value can be set for it.

[Hydrogen]

The total market value of a currency, its "monetary base", is driven by two things, transactional demand and reservation demand.

1. Transactional demand - Daily transaction volume.

2. Reservation demand - Hoarding/long-term investment.

It is expected that with more merchant adoption the transactional demand would increase.

3. Hurdle rate - Rate of return required to compensate for the risks associated with holding Bitcoin. Yeah, technopolitical hurdles or backlash from a country can have an impact on Bitcoin's expected value.

Theoretically, the fair-market value of one BTC should simply be the dividend of its predicted future monetary base (total market cap) and BTC in circulation, discounted by a "hurdle rate."

For further illustration, it might also help to consider how a venture capitalist could determine the net present value of an investment that he never expects to generate positive cash flows during his firm's investment period (e.g. a high-growth tech company that reinvests 100% of its earnings before it ultimate sells to Google). In the absence of earnings, that VC might look at revenue multiples to determine the company's terminal value, and then discount that figure by a rate of 40 to 60%.

With Bitcoin, the thinking is the same. Except Bitcoin's terminal value is actually its future monetary base.

This framework relies on assumptions only, but backed by Bitcoin having all the attributes of money, its scarcity and underlying technology.

A rational market price for something that is expected to increase in value will already reflect the present value of the expected future increases. In your head, you do a probability estimate balancing the odds that it keeps increasing.

http://www.investopedia.com/articles/investing/050914/easy-way-measure-bitcoins-fair-market-value-doityourself-guide.asp?

Good post OP.

There are many similarities drawn between bitcion and gold. Are there parallels which can be drawn between methods utilized to calculate the fair value of gold (precious metals) and the fair value of crypto currencies due to both not being applicable to the typical Price/Earnings(P/E) model which many equities investors favor as a method of calculating valuation?

Here's another potential method for calculating a fair value for btc.

#1 Size estimate of current btc userbase : Current btc price.
#2 Expected size of future btc userbase : (Projected future btc price via proportion)

If the size of bitcoin's population doubles roughly every 12 months, that rate of growth could be relatively stable similar to how moore's law guidelines the number of transistors able to fit on a die double approximately every 24 months.

Not to imply that the price of btc should double annually. Some of the growth we're experiencing now could be due to btc being undervalued for a long time relative to the growth of its userbase.

[ongels]

Bitcoin has no definite value, it is designed to fluctuate to make opportunities to the user, this is the most indulging part of making btc business, Lets expect more, and will eventually lift our motivation to dig more,

[Osarman]

The basis of determining true value without going much deeper in Economics is by taking average of prices worldwide.
As Bitcoin has negligible real value (not zero because of some degree of utility), the only basis of determining value is what buyers wanna pay for it. The demand may differ worldwide due to different outlook and circumstances in different countries. So it is always better to average prices of different nations.

I have a lot of things to say, though I don’t really know how to put cause I’m not an economist, but first I will start by saying there is no fair value for Bitcoin. Yes, there is no fair value, whatever you see there is the value, nothing like fair and unfair. I don’t know how price is being determined, so I can’t really tell.

One thing I know is that I see people say that price is being determined by how much people are investing and stuffs like that. And my question is who is ready to buy at a rate that is too high, cause you said the value is determined by what people are willing to buy.

[haroldtee]

The basis of determining true value without going much deeper in Economics is by taking average of prices worldwide.
As Bitcoin has negligible real value (not zero because of some degree of utility), the only basis of determining value is what buyers wanna pay for it. The demand may differ worldwide due to different outlook and circumstances in different countries. So it is always better to average prices of different nations.

As long as there is need for it and people tend to make use of it the more, then the value at that stage would always be fair. For example, in Zimbabwe, the government implemented a control policy where the citizens cannot do any international transfer except local transfer as there is low supply of cash since they had to depend on making use of the USD for now with their own bad currency.

People then, started shifting to bitcoin as the only means for international transfer, for businesses and international trading which has made bitcoin to be trading above $12,000. That is what the demand for it over there has caused and that is fair considering that someone is willing to pay for it at that price due to its usefulness.

[thinair]

How can there be a "fair" value for bitcoin.

In the first place, there isn't even a tangible bitcoin; it is just a digital entry in a public internet file - the blockchain. The price of bitcoin is just the spot price in any trading platform. So at any time - as long as there is a "fair" global spot market - there is a spot price; it is neither fair nor unfair. Without the internet, there is not even a price for bitcoin.

Even physical gold does not have any fair price, only what the buyers/sellers quote.

[CryptoGeneral]

The fair value of bitcoin is the price that people are willing to pay for it. Right now it is around $7200

[Akash1243]

This rise in price of bitcoins is mainly because of the upcoming fork segwit2x which would have deep impact on bitcoins and many people has started to invest more and more in bitcoins as it is predicted that after fork bitcoins will increase.Well i don't think so that bitcoins will have a fixed fair value as price of the bitcoin is depended on the demand from the people so how much a person is will to give will be generally the price of a thing.But I do think that this price is because of fork so there would be correction after this fork and that price would be fair value for that time.Fair value would keep on changing as more people invests in bitcoins.

[shillberting]

The fair value of bitcoin is the price that people are willing to pay for it. Right now it is around $7200

Pretty much this, because with no Balance sheet and earnings to report from you have no way of assigning proper value. And for this reason you must revert to the simple laws of supply and demand to determine a fair price.

This price may not be accurate at what an actual bitcoin is truly worth but given it is the price the market will pay for a bitcoin then yeah I think this is as close as we get towards a fair price point.

[digaran]

This rise in price of bitcoins is mainly because of the upcoming fork segwit2x which would have deep impact on bitcoins and many people has started to invest more and more in bitcoins as it is predicted that after fork bitcoins will increase.Well i don't think so that bitcoins will have a fixed fair value as price of the bitcoin is depended on the demand from the people so how much a person is will to give will be generally the price of a thing.But I do think that this price is because of fork so there would be correction after this fork and that price would be fair value for that time.Fair value would keep on changing as more people invests in bitcoins.

Ordinary people couldn't possibly invest billions every day, big companies wont take such risks to invest on Bitcoin like now. central banks with the help of their governments are pushing the price up, they know if you have the majority of the circulating supply, you could seize control of the market flow.
Bitcoin has no fair value, Bitcoin is trying to be a vault for money, not just any money but all the money in the world.

[centralbanksequalsbombs]

The fair value of bitcoin is the price that people are willing to pay for it. Right now it is around $7200

Pretty much this, because with no Balance sheet and earnings to report from you have no way of assigning proper value. And for this reason you must revert to the simple laws of supply and demand to determine a fair price.

This price may not be accurate at what an actual bitcoin is truly worth but given it is the price the market will pay for a bitcoin then yeah I think this is as close as we get towards a fair price point.

Think of the larger outside force controlling all this: the unrestrained global supply of fiat currency/credit...too much pumped in too many hands

[buharikx31]

The current value it's a fair value based on trading price and i think it should be valued 7300$ for 1 bitcoin, people will define the value of cryptocurrency and it possible can be even biger value