What is Bitcoin's fair value?

[HabBear]

Yesterday, BlackRock Strategist Richard Turnill said there’s no inherent right or wrong Bitcoin price, no fair value.

This strategist's comment is so theoretical it's almost a joke.

There is a right and wrong Bitcoin price. The test of that is whether anyone in the world would accept a bitcoin for any price above face (right now). Most people would accept bitcoin for a small premium because they'll have faith that the price would soon pass their buy price, but it's only a small amount of premium that would be accepted.

Would you buy my 1 bitcoin for $10,000? No. You'd say "that's the wrong price!"

This strategist just doesn't know how to value a currency that isn't backed by the GDP of a country. That's all it is.

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[ferdaus]

It is difficult to determine the fair price of Bitcoin. Why did not have stabilized anymore. It is difficult to say whether the price will be fixed in the future.

[Hydrogen]

In that video, the author says that the 1000% return of bitcoin in a year is not justified by a fundamental ratio of bitcoin, which is the number of transactions completed using the cryptocurrency. He goes into consider different aspects and says that the only factor that could justify that price raise could be bitcoin taking over gold as a reserve currency, but he doesn’t agree 100% with that view.

So, what he says is that bitcoin is in a bubble in the sense that it is overheated, meaning that the actual price is above the fair value. Which leads me again to what I said in the beginning:

Could we calculate a fair value for bitcoin? If so, what ratios should we use?

https://bitcointalk.org/index.php?topic=2356775.0

If anyone has heard of Norton antivirus founded by Peter Norton. Here's an interesting quote he made in the early days of IT security.

Peter Norton:  "(With computer viruses)We're dealing with an urban myth. It's like the story of alligators in the sewers of New York. Everyone knows about them, but no one's ever seen them."

It is possible that a lot of things said about bitcoin are similar to what people said in the early days of computer viruses when many thought they were a hoax or myth & refused to believe they existed until hard evidence became distributed years later. Crypto is a new and emerging technology. People try to place expectations upon it based on what they know about existing technologies like the stock market but overall it may be futile.

Offhand I can think of examples where stocks exhibited 300 times growth. After the economic crisis of 2008 there were bank stocks priced @ $0.01 which rose as high as $3.00 after the bailout bill was announced, 300 times increase in value. These types of massive price increases have been known to happen under special circumstances and aren't as impossible as some claim.

If I remember correctly the zimbabwe dollar gained incredible value, more than 300 times growth(?), as it rebounded from its last hyperinflation. The venezuelan bolivar could potentially sustain incredible growth, greater than 100 times value in 1 year, if venezuela's economy stabilizes and recovers. Massive increases in price or value may not be as rare or extraordinary an event as some believe.

[eaLiTy]

It is really difficult to put a fair value for bitcoin,there were many analyst who claimed that the price would touch $10000 in ten years time,and the basis of this assumption is that there would be more investments during this time and hence the price would increase,what happens if the rate of investment increases rapidly as we see today,the price just blooms ,since it is limited in number it is hard to set a fixed price,the more people are investing in it ,more the price will be.

[bubblebit]

What is Bitcoin's fair value?

You have tackled some good points on that post. But the biggest problem is, in cryptocurrency there is no such accurate data gathering not like most stock investments. We can’t even account the bitcoin that Nakamoto have or if it being sold. The fair value can be calculated upon the demand + the availability of such item but bitcoin even have the exact 21+ million supply but to know where and if it was not lost is a different scenario.

[JL421]

It has a fair value currently there hasn't been any downfall lately and it is only rising as long as the price of bitcoin is rising i surely think it is a fair price but when it starts getting dumped thats the moment i feel it should increase

[Dodoymabs]

There is no reasonable way to price Bitcoin. It all depends how many uses will be found for it and whether some other digital money will become more popular. But the price will probably get more stable once the market capitalization is getting bigger.Bitcoins value is only based on people speculation.

[hase0278]

There is no reasonable way to price Bitcoin. It all depends how many uses will be found for it and whether some other digital money will become more popular. But the price will probably get more stable once the market capitalization is getting bigger.Bitcoins value is only based on people speculation.

So long as anyone buys it in it's current price it is it's fair value since there is no way to determine the real fair value of bitcoin. If it dumps, that is the sign that the price as of the moment has been to high. If it pumps, then all that means is that bitcoin's fair value increased. If there is a way to determine it logically, then it would be easier to tell which price is it's fair value but for now let us just say that the current price is it's fair value.

[Razick]

Bitcoin's fair value is whatever the market says it is. It depends on various factors such as the market cap, how many Bitcoins are in existence, etc. One of the most important value factors of BTC is its retail usefulness, that is how many online stores actually accept it as a method of payment for their products/services, and also in-person.

[fanbeila]

We could not determine any particular value as fair value of bitcoin.Just as gold price increases or decreases with change in demand,same would be with bitcoin.Its price is affected either positively or negatively by the market factors.Japan legalized bitcoin and thousands of retailers started accepting bitcoin payment triggering its price.China's ban on ICOs made bitcoin price to fall a little temporarily.Bitcoin's potential is that it deserves more price than what it is today.

[beerlover]

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.

Yes, the decentralization alone is a value and the fact that people end up knowing that the government cannot just be busy controlling their way of spending and enslaving them is what would make bitcoin to keep increasing in value.

The value of bitcoin at any point is fair since there is demand for it and without utility or great value, the demand would not have been high. So, even if it is tagged at $1 million, it is still a fair value as long as people need it, just the law of nature.

[Reid]

I love how the posts was based on facts and backed up by some website and knowledge about it.
I think this is the perfect definition that would make newbies understand it. There is not much of deep words and just clearly said.
I am not perfect with my English but yet I did honestly understand all of it.
Scarcity is the true answer. Anything that is getting depleted will have to be more valuable specially people are backing it up.

[sindikat]

The fair value of bitcoin is only when he will become a tool for economic development. When no matter how much you have coins you can't control the market. Many people do not believe in Fiat but economic laws are hard to break. The state used Fiat for their own purposes and this led to the fact that we have wild inflation. Bitcoin is now rising in price and no one is interested in the reasons for this. We can become a victim of such growth. Everything should have a purpose.

[Lorna t]

  maybe bitcoin is one of the biggest company in all countries it has a great investment platform and excellent compensation. Bitcoin is a new currency that was created in 2009 and of course it has been bitcoin ,but it does not change anything else they increase value or became equal to all of them.
This is still important and still is a currency value .there is not equal to or bitcoin with one bit at all and the bitcoin is one of the money passed to all the banks and large stores it is used a way to be sure if you want bitcoin to money change....

[BartS]

Yesterday, BlackRock Strategist Richard Turnill said there’s no inherent right or wrong Bitcoin price, no fair value.

This strategist's comment is so theoretical it's almost a joke.

There is a right and wrong Bitcoin price. The test of that is whether anyone in the world would accept a bitcoin for any price above face (right now). Most people would accept bitcoin for a small premium because they'll have faith that the price would soon pass their buy price, but it's only a small amount of premium that would be accepted.

Would you buy my 1 bitcoin for $10,000? No. You'd say "that's the wrong price!"

This strategist just doesn't know how to value a currency that isn't backed by the GDP of a country. That's all it is.

Correct the only fair value is the one people are willing to to pay for a bitcoin if at some point that value reaches 100,000 dollars or 1 dollar that is irrelevant that is what people are going to be willing to pay for it, so the current price is correct but as we know what can be considered a fair value changes everyday and that is fine, people are not used to a currency to move in this way but bitcoin is a new type of currency so it is natural that displays a different behavior as well.

[Deepiefface10]

Yesterday, BlackRock Strategist Richard Turnill said there’s no inherent right or wrong Bitcoin price, no fair value. On multiple occasions Bitcoin has been criticized for lacking fair value. I haven't come across any stats or traditional methods that can be used to calculate Bitcoin's fair value, but does that mean Bitcoin doesn't have a fair value?

I found an article on Investopedia about how to measure Bitcoin's fair market value. I don't think this framework is statistically accurate, but theoretically plausible. Almost all predictions regarding Bitcoin price are speculative in nature, but backed by a solid belief that Bitcoin's scarcity and its underlying technology is potentially revolutionary which would have an impact on different sectors. Bitcoin has value because people think it has value, right. It means Bitcoins have positive expected value.

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?

it is better to make market detect price not force price into special point
like satoshi say

[Theb]

What will work for other asssets won't work for Bitcoin. It has been debated on more often now as Bitcoin's proce is above 7000$ and many people now are curious if Bitcoin is now overpriced. The problem is thatwe don't know how to compute Bitcoin's fair value even the Big Investors cannot throw a number onto it. The Buyer's confidence is getting weaker and weaker everytime Bitcoin's price goes up higher.

[centralbanksequalsbombs]

What will work for other asssets won't work for Bitcoin. It has been debated on more often now as Bitcoin's proce is above 7000$ and many people now are curious if Bitcoin is now overpriced. The problem is thatwe don't know how to compute Bitcoin's fair value even the Big Investors cannot throw a number onto it. The Buyer's confidence is getting weaker and weaker everytime Bitcoin's price goes up higher.

When will central banks in the world, as an aggregate, stop increasing the supply of fiat-currency/credit in the world?

That'll be the answer.

[justdimin]

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.

Yes, once the buyer is ready to pay what you are willing to give it out for, then I do not see anything unfair in that value. That simply means it is very much needed and same value is hard to come by from something else. We the users are in control and if we feel we want to give it out lower than what the market is giving it, then it is our choice. As long as the demand is needed most especially more than the supply, then it is a very fair value.

[denny27]

We know that bitcoin price are easily influenced by many things, for the moments I think the price at $7000 can be said to be a fair value right now, in the more people are getting closer on bitcoin, a lot of people more interested on investing in bitcoin, and the more of countries that has been legalize bitcoin as a currency. Of course all that's things can be affecting on bitcoin price was so high at right now and I still believe the price still can leads to moving higher again.