Bitcoin price determinants

[Khaoula26]

Hii every one... I'm a financial student  and this is my last year... and I start thinking on my master this... I choose to work on the price determinants of bitcoin... I want to work on these determinants: the geopolitical risk index ( proxy for economic uncertainty), Wikipedia views ( maybe I work on the number of posts in bitcointalk) and gold price.... so what do you think??... please help me and give me some suggestions

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[franky1]

those stats dont have any impact on bitcoin price.

try learning about mining cost

the math is simple
at current average 50exahash miining stats (50000000terahash) thats 3571428 asics(14tera each)
working out the cost per coin can be done
hardware
even at their second hand sell off of $450/unit=$1,607,142,857.14
which if running for a year before unit replacement = $2452.90 hardware cost per btc(x/26/2016/12.5)
electric
571428*$0.08=$285714.24
$285714.24 an hour = $3819.99 a btc (*24/365 then /26/2016/12.5)
hardware and electric =$6272.89

electric= 0.06centsper kwh  =(0.08cents for a ~1.33kwh equiv)
asic hardware unit=$450
asic hardware hashrate 14tera hash
asic hardware electric =~1.3kwatt/h

people assume one block every 10 minutes(a block has 12.6btc each)
but the timing is 2016 blocks every 2 weeks target. thats why you see the math stretches numbers out for the year then divides it down to fortnightly(/26) then block(/2016) then coin per block(/12.5). to be a lil more consistent
(you could just for instance take the kwh total /6 /12.5.. but yea it makes a lil difference $3809.52 as oppose to 3819.99 so $10.49 difference)

...

what you then find is that mining costs give a good estimate of the zone area of real value (base price/intrinsic value)

then comes the 'speculative waves' of random ups and downs.
when the bitcoin price is below the mining cost. people decide its cheaper to buy btc direct than to mine it. so the price moves up.

then if there was some speculation that made the price move up too much. mining decides to progress up too. albeit at a slower rate as smart miners on on contractual growth.
so many sudden price rises are not sustainable and correct back down (the $20k spike for instance)

wiki page views and forum views have no statistical correlation. neither does google analytics.
the stats of page views ar people researching bitcoin days AFTER a price change, due to panic media news flash and other propaganda after the fact.

[franky1]

another determinant is not looking at the highs or the averages of bitcoin price history.
but instead look at the LOW
you will find that if a prices BOTTOM has tested a value several times and has refused to go below that over multiple month then that becomes a support line

11 month support bottomline $5,800
3 month support bottomline $6,100

that support line helps keep the price above a certain level as the majority of traders would have cycled their coins through exchanges and services and spending habits at or above that price. and gave traders many chances to sell

so the longer prices stay above it, the majority have a mindset that the price is above that level to either have already sold if they thought it was profitable, thus the new buyer has it set as their minimum price.. or if not sold its in that persons mind that the price zone/bottom is their new bottom too, even if they bought it cheaper earlier

no one can predict the hourly/daily movements of speculation. but the value zone can be calculated.

[Jackolantern]

I think that you are a smart student and you have made the right choice because btc price determinants are the interesting topic to learn and i think that you will be able to succeed in this area

[Al-e_x]

the determinant of bitcoin prices is trading volume, demand, and inventory. Bitcoin's volatility cycle is the same as the world economy in general, but bitcoin has the principle of decentralization, so the value of volatility is fast and difficult to predict.

[figmentofmyass]

Hii every one... I'm a financial student  and this is my last year... and I start thinking on my master this... I choose to work on the price determinants of bitcoin... I want to work on these determinants: the geopolitical risk index ( proxy for economic uncertainty), Wikipedia views ( maybe I work on the number of posts in bitcointalk) and gold price.... so what do you think??... please help me and give me some suggestions

you need to analyze supply and demand. you need to consider what drives bitcoin adoption, and what other markets it may be cannibalizing (eg gold). people are increasingly distrustful of banks these days---maybe that is a correlation worth investigating.

you should also consider the possibility that bitcoin's price cycles and long term uptrend might create feedback loops in investor sentiment. for example, dip buyers who step in to buy when the price approaches its logarithmic growth trend. an old mentor of mine once characterized bitcoin as a veblen good, which is another perspective on what drives demand.

try learning about mining cost

why would mining cost matter? price is determined by supply and demand, not the sunk costs of miners. if miners speculatively overinvest in hardware, that doesn't mean the market is magically going to save them by buying coins at a higher price.

[franky1]

"supply and demand" pfft.. thats 5year old stuff

supply is layered.
demand is layered.

once you delve into the layers you start to see the bigger picture.

plus simply saying "supply and demand" is meaningless

i have 10 bags of dog poo, and i know of 7 billion people.
there is the supply and there is the demand... see.. empty debate

the OP is at college/university level not 5year old level.

as for saying the cost of creating/obtaining an asset has no relevance to determining the price of an asset is a big laugh
EG
if it cost you $10 .. your not going to be foolish and sell it for $0.01cent. your atleast going to want $10 for it.
and then ontop of that speculate the desire/need/function value to add on (how much profit you can make (raise the price)) before a buyer thinks your being too greedy if too high or a great deal if at/near your cost

[AdamRay]

Hii every one... I'm a financial student  and this is my last year... and I start thinking on my master this... I choose to work on the price determinants of bitcoin... I want to work on these determinants: the geopolitical risk index ( proxy for economic uncertainty), Wikipedia views ( maybe I work on the number of posts in bitcointalk) and gold price.... so what do you think??... please help me and give me some suggestions

Bitcoin prices are influenced by a variety of factors. manipulation, political factors and, most importantly, news. The best example is when a lot of articles say that USDT is a form of fraud. Bitcoin prices are rising because they sell USDT to buy Bitcoin.

[pooya87]

Wikipedia views  and gold price....

i don't know what the first one is but these two;
when people want to look at "views" they choose google trends not Wikipedia views! but that is a mistake because it is not something that affects bitcoin price. it is the other way around. meaning when price goes up, the media starts talking about bitcoin and it gains popularity and that causes to be a lot more people searching for it.
as for gold price, there is no connection as far as i know. i would like to see a study to be prove me otherwise though.

try learning about mining cost

the only way you can study this is the psychological effects this has on traders and where they put their buy orders to form a buy support. otherwise mining cost is dynamic not fixed. and it changes with the price!

[Cruxer]

so what do you think??...

i think you could with same probability determine price by tea leafs
there are hundreds factors at least, you would use three? not most revelant ones? comeone

[- ESPERS -]

       It's a very interesting topic to work with. Prices are influenced by a multitude of factors, among the most important being information and project propaganda, but also political factors. Bitcoin like the other coins can not have a lower price than mining cost. That is, the bitcoin can not be less than the cost of creating it. On this point you have to insist the most with your analysis.

[franky1]

try learning about mining cost

the only way you can study this is the psychological effects this has on traders and where they put their buy orders to form a buy support. otherwise mining cost is dynamic not fixed. and it changes with the price!

no one can predict the price minute by minute. hour by hour. so forget this conversation is about prediction
price determination is about determining the price not predicting it

EG how do you know bitcoin is valued at the $6k(sustained/long period) range instead of $1(sustained/long period) or $20k(sustained/long period)

easy. if the hashrate this month shows the $6k range then thats the area sustained prices would return to after the corrections of speculative waves

mining is not reactive as many think smart pools have already calculated a year ahead their growth. (leased building space requirements, planned staff requirements, paid upfront contracts to buy excess electric. producing asics/purchasing asics)

miners are not ractive to OMG social drama face just said something bad, so we must turn off asics..
for miners their concern is the % chance of getting slices of the ~1800 daily btc reward cake

its all pre planned. extra asics or electric demand doesnt magically appear when needed

so when mining. if the cost of mining to get coin is cheaper done by just buying it.. they will. and if cheaper to mine it, they will

the psychology of this is pre set. thats the point.
its natural flow. if you have 2 market stands sat side by side. offering the exact same end product but standA is cheaper on a monday and standB is cheaper on a tuesday. you can already know which stand will have the action occuring more so before it happens.
what you find over time is if standA and standB are different initially, they eventually find a mutual equilibrium

the rise in hashrate that stands the test of 3-12 months causes a base value to equilibrium into that area.

EG
if mining cost only $1 a btc guess what. miners would mine it at $1 and sell it for profit at any price above $1. all the way down to $1.0X because its still profitable

but because it costs in the $6k range they wont sell for $1. thats pretty much a given guarantee before even having to look at the price chart that you wont see a $1 btc while it costs in the $6k range

and thats the point in determining the price.

the speculative (temporary) drama waves that then correct. yep unpredictable. but determining the base value that prices return to after drama events(corrections).. is possible

if you told me (given asic hardware was the same $450 and electric base was 6centskwh) and said for the last few months hashrate was in the 90exa area.. id tell you ignoring the temporary waves. the btc base value area would correct to around ~$12k

[figmentofmyass]

i have 10 bags of dog poo, and i know of 7 billion people.
there is the supply and there is the demand... see.. empty debate

there's no demand for bags of dog poo. there's no use for it and people don't want it around, so we should not expect the price to rise. that's how you analyze supply and demand.

i'm really not sure what point you're trying to make.

as for saying the cost of creating/obtaining an asset has no relevance to determining the price of an asset is a big laugh
EG
if it cost you $10 .. your not going to be foolish and sell it for $0.01cent. your atleast going to want $10 for it.

it doesn't matter.

first of all, miners are not the only source of distribution. everyday, they become less relevant since 17.3 million coins have already been mined. the rest of the market doesn't care about their costs.

second of all, you act like miners have no overheads and no reason to sell. you're quite right they don't want to sell at a loss. no investor ever wants to sell at a loss, but it happens all the time. and in the case of miners, they may have rent, electricity, and other costs to cover. their operation may be leveraged and they may be forced to liquidate to cover borrowed funds in a bear market. you make it out like all miners can afford to never sell at a loss. like any investor, miners eventually capitulate when losses compound and/or market recovery seems unlikely.

third, not all miners have the same costs. there's a wide range of possible costs depending on electricity costs (or free electricity), rent, cooling costs vs heating bill subsidy depending on region, access to cheap chip manufacturing. there is no single "cost of mining" that you can point to and say "miners won't sell below this level".

[franky1]

second of all, you act like miners have no overheads and no reason to sell. you're quite right they don't want to sell at a loss. no investor ever wants to sell at a loss, but it happens all the time. and in the case of miners, they may have rent, electricity, and other costs to cover. their operation may be leveraged and they may be forced to liquidate to cover borrowed funds in a bear market. you make it out like all miners can afford to never sell at a loss. like any investor, miners eventually capitulate when losses compound and/or market recovery seems unlikely.

third, not all miners have the same costs. there's a wide range of possible costs depending on electricity costs (or free electricity), rent, cooling costs vs heating bill subsidy depending on region, access to cheap chip manufacturing. there is no single "cost of mining" that you can point to and say "miners won't sell below this level".

firstly. when they liquidate. other pools take the slice of the pie the liquidated pool now doesnt.
you can calculate that.

secondly miners have similar costs to stay competitive. as you say if they are over leveraged, they lose. so over time those that are surviving the last 4 years of asic mining are surviving because thier costs are pretty equal to avoid liquidating out
(they had 4 years to find their cost equilibrium)

yea if you start up a new farm. chances of liquidating are higher.. same with any business.. but if you can get passed the first couple years where you are smart enough to find the efficiency and get the costs to a competitive level. then youll find your at the same costs as your competitors

thats why i said its not just simple 5yo "supply and demand".. there is more to it then that.

even yourself argue that its more than supply and demand. if you actually read your own words in detail

[figmentofmyass]

second of all, you act like miners have no overheads and no reason to sell. you're quite right they don't want to sell at a loss. no investor ever wants to sell at a loss, but it happens all the time. and in the case of miners, they may have rent, electricity, and other costs to cover. their operation may be leveraged and they may be forced to liquidate to cover borrowed funds in a bear market. you make it out like all miners can afford to never sell at a loss. like any investor, miners eventually capitulate when losses compound and/or market recovery seems unlikely.

third, not all miners have the same costs. there's a wide range of possible costs depending on electricity costs (or free electricity), rent, cooling costs vs heating bill subsidy depending on region, access to cheap chip manufacturing. there is no single "cost of mining" that you can point to and say "miners won't sell below this level".

firstly. when they liquidate. other pools take the slice of the pie the liquidated pool now doesnt.
you can calculate that.

not necessarily. there's absolutely no guarantee that when one miner shuts down, another will take his place. why would you make such a strange assumption?

using that line of thinking, difficulty could only increase. instead, we see that it drops sometimes.

secondly miners have similar costs to stay competitive. as you say if they are over leveraged, they lose. so over time those that are surviving the last 4 years of asic mining are surviving because thier costs are pretty equal to avoid liquidating out

they've managed to avoid unprofitability (or at least unprofitability to the point where liquidation was necessary). there is no guarantee that price will remain high enough for that to be true indefinitely. you make it out like miners have some magical right to profitability.

even yourself argue that its more than supply and demand. if you actually read your own words in detail

no, i'm saying that many different factors affect supply and demand.

[adaseb]

The amount of new users and activity on Bitcointalk forum can actually be a good determinant. Look here:
https://bitcointalk.org/index.php?action=stats

It actually has stopped updating since Dec 13th, which is actually near the ATH (ATH was Dec 17th) but if you look at the amount of New Topics, New Posts, New Members and Page views you can see that it was growing as the price was growing.

Another way to measure this is simply looking at the Google trends for Bitcoins.

However it might not be the most accurate determinants and in my opinion, I think its a lagging indicator similiar to a moving average off a regular technical analysis.

[davis196]

Hii every one... I'm a financial student  and this is my last year... and I start thinking on my master this... I choose to work on the price determinants of bitcoin... I want to work on these determinants: the geopolitical risk index ( proxy for economic uncertainty), Wikipedia views ( maybe I work on the number of posts in bitcointalk) and gold price.... so what do you think??... please help me and give me some suggestions

This "Wikipedia views" factor doesn't make any sense to me.Some people might be curious about bitcoin and cryptocurrencies in general,but that doesn't mean that they will invest in coins.
Google Trends about some keywords like "bitcoin" can be a more accurate factor.There was a study that found a correlation between the bitcoin price and the amount of google searches for the keyword "bitcoin".
franky1 already mentioned all the other factors that have impact the bitcoin price.

[vit05]

I believe that the value of the dollar puts more pressure on the price than the value of gold. The dollar has appreciations and devaluations in relation to other currencies and Bitcoin is traded in several places around the world. In many of these places, the traders who started trading Bitcoin came from the forex market and always observe the price of the local currency, the dollar and Bitcoin.

Wikipedia you would perhaps have to join several articles that are correlated to Bitcoin. Blockchain, cryptocurrencies etc. Something that could also be taken into account are articles written by the traditional media. TV programs, technology sites and common websites. They talk about Bitcoin for a new audience. They always start talking more when the price goes up a lot, or falls a lot. But what is the impact on price?

[YuginKadoya]

Predetermining the determinants of bitcoin we can conclude the supply and demand first as we can see right now the booming demand for it just skyrocketed and theoretical understanding is limited regarding the value of blockchain-based cryptocurrencies, as expressed in their exchange rates against traditional currencies, We should consider its exchange rate against USD were it all begun and we also identify a significant impact of mining technology and a decreasing significance of mining difficulty in the Bitcoin exchange price determination.

If you are talking about mastering all these things you will have a hard time analyzing each of it, but if you are pretty determined in earning and getting more bitcoin and another cryptocurrency, But the best way is to just invest as the price is at its cheapest for now, I really think mining is not suitable if you will determine a lack of resources in getting a mining RIG and the amount of electricity needed for it it may sure cause not having to ROI, I really think mining is not totally for all.

[exstasie]

I believe that the value of the dollar puts more pressure on the price than the value of gold. The dollar has appreciations and devaluations in relation to other currencies and Bitcoin is traded in several places around the world. In many of these places, the traders who started trading Bitcoin came from the forex market and always observe the price of the local currency, the dollar and Bitcoin.

There is a broad correlation between Bitcoin and the dollar, but I'm still not sure how strong the causation effect is. I suspect you're right that USD valuation has some effect on BTC, and probably gold as well.

I don't think traders affect the market very much though. Traders are always on the margins, trying to predict and react to changes in the trend. They definitely cause short and long squeezes, but I don't think they are responsible for the long term trends, which I think are caused by investors/miners accumulating and distributing.