What is really the value of Bitcoin?

[jellylily]

Noob here. Even if some places accept Bitcoin, the price is still quoted in dollars? Bitcoin's value per say is in US dollars, a fiat currency subject to inflation. If we remove the value based on the dollar, then is the price of Bitcoin just based on supply and demand?

I also hear people like Cathie Woods and analysts at JP Morgan say Bitcoin will reach $500k or $140k respectively. I understand for stocks you can look at financial statements and make valuation models to calculate target prices, but for Bitcoin, is the value based on the scalability of network?

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[pooya87]

Noob here. Even if some places accept Bitcoin, the price is still quoted in dollars? Bitcoin's value per say is in US dollars, a fiat currency subject to inflation. If we remove the value based on the dollar, then is the price of Bitcoin just based on supply and demand?

Value of everything is based on supply and demand even USD itself. When they print a lot of it (increase supply) while demand remains roughly the same the value of USD drops. But when bitcoin's supply is fixed and demand for it is increasing that means its value keeps rising. It rises more when you measure it in an inflationary currency such as USD and when that currency loses its value.

I also hear people like Cathie Woods and analysts at JP Morgan say Bitcoin will reach $500k or $140k respectively. I understand for stocks you can look at financial statements and make valuation models to calculate target prices, but for Bitcoin, is the value based on the scalability of network?

It is partly based on past behavior, some technical analysis, some fundamental analysis, some extrapolation, and finally some guesswork.

[Charles-Tim]

Even if some places accept Bitcoin, the price is still quoted in dollars?

It depends on what you prefer, there are some local exchanges that Bitcoin is paired with local fiat. El Salvador has just recently accepted Bitcoin as a legal tender, Bitcoin will be paired with the El Salvadorian fiat currency. But most people like it paired with US dollar, it is just preference, while also dollar is the most recognized currency which makes it common and default.

Bitcoin's value per say is in US dollars, a fiat currency subject to inflation.

1 Bitcoin is 1 Bitcoin, but people are mostly using fiat, and Bitcoin price is paired with fiat to make people know its worth to fiat.

If we remove the value based on the dollar, then is the price of Bitcoin just based on supply and demand?

Yes. Even the increasing demand has been the main reason Bitcoin is valuating and increasing in price and marketcap, while almost all Bitcoin are mined and the supply into circulation is reducing, the reducing supply into circulation is also helping in its valuation because if more supply is introduced into circulation, it will affect its price by making it not to valuate the extent it supposed to be. Also fiat inflation and devaluation is also important as it is also part of the factors that valuate the price of bitcoin if compared to fiat.

I also hear people like Cathie Woods and analysts at JP Morgan say Bitcoin will reach $500k or $140k respectively. I understand for stocks you can look at financial statements and make valuation models to calculate target prices, but for Bitcoin, is the value based on the scalability of network?

It can also be calculated. Also nothing scalability has to do with the calculation, scalability deals with transaction speed.

[Kong Hey Pakboy]

There is no true value for bitcoin because it's like a stock or anything that has a market, it constantly grows or not all the time because people are always coming in and coming out of the market. To be honest with you, looking for the absolute is close to impossible if not difficult.

[NeuroticFish]

is the value based on the scalability of network?

The value is also based on scarcity, the difficulty to obtain (mine) it, the demand...
There are a lot of factors to be counted in, hence most use TA and extrapolation.

Also keep in mind that there's also another way to read those speculations on the price made by various people:
* some say it to show their support for Bitcoin (especially people involved in bitcoin related businesses)
* some say that so people will talk about... them

[DapanasFruit]

Here in my country, there is a local-based exchange where Bitcoin and some other coins are quoted in our local money, though of course if you gonna convert them into dollars it looks almost the same. As long as people would prefer that they convert their Bitcoin into this or that fiat money, then it would be the standard...not unless we are already in the dreamed situation where we are paid by Bitcoin and most products available even in the local level are already priced in Bitcoin. We have to wait for that to happen. As to the value of Bitcoin, it is considered as the money of the internet and gold 2.0 and just like anything else it's value is what people ascribe them to the asset so how a person assesses Bitcoin is quite subjective. 

[BlackHatCoiner]

Noob here. Even if some places accept Bitcoin, the price is still quoted in dollars? Bitcoin's value per say is in US dollars, a fiat currency subject to inflation. If we remove the value based on the dollar, then is the price of Bitcoin just based on supply and demand?

The Bitcoin price is already based on the economic laws of supply and demand. We just need to measure it somehow and our fiat currency is one way. It is globally adopted and there is a force from the government to its usage. But, you can also measure it to other currencies and cryptocurrencies. Each one evaluates it differently, that's why there isn't a standard price.

I also hear people like Cathie Woods and analysts at JP Morgan say Bitcoin will reach $500k or $140k respectively. I understand for stocks you can look at financial statements and make valuation models to calculate target prices, but for Bitcoin, is the value based on the scalability of network?

The preferably chosen word “price”, instead of value, or the “market value” of Bitcoin is based only but its supply and demand. The fact that halvings occur or that the network becomes scalable affects the supply and demand analogously.

The value is also based the difficulty to obtain (mine) it

This is a common mistake. Its value isn't based on the difficulty. Its difficulty is based on its value. Think about it, if there is more demand and the price rises, the difficulty rises too, because mining becomes more profitable. If there is less demand and the price falls, the difficulty does too.

[NeuroticFish]

The value is also based the difficulty to obtain (mine) it

This is a common mistake. Its value isn't based on the difficulty. Its difficulty is based on its value. Think about it, if there is more demand and the price rises, the difficulty rises too, because mining becomes more profitable. If there is less demand and the price falls, the difficulty does too.

I see it as a circle. Price feeds greed i.e. investment hence increase of difficulty, difficulty means network security which ends up asking for better price.
I am also not convinced that a "crypto winter" decreases the difficulty accordingly (in percents).

[Kittygalore]

It's difficult to say because bitcoin prices is constantly moving and I don't think that we will be able to determine the exact value of bitcoin, maybe we can average it but it's going to be changing everytime.

[shield132]

Noob here. Even if some places accept Bitcoin, the price is still quoted in dollars? Bitcoin's value per say is in US dollars, a fiat currency subject to inflation. If we remove the value based on the dollar, then is the price of Bitcoin just based on supply and demand?

The Bitcoin price is already based on the economic laws of supply and demand. We just need to measure it somehow and our fiat currency is one way. It is globally adopted and there is a force from the government to its usage. But, you can also measure it to other currencies and cryptocurrencies. Each one evaluates it differently, that's why there isn't a standard price.

Hm... Actually, there is very... how to say... blind demand on bitcoin. A high percentage of people buy it without a reason. There is demand on USD, everyone wants it but check the pockets of people - not enough supply. It's value is down compared to the past.

Supply/demand plays its role but it's not really like that alone. I think that illusory truth effect playes huge role. Ask any guy and he will answer that bitcoin's price will rise after halving because mining reward declines. Yeah, that's true but if reward is halfly cut, price shouldn't triple. And price rise don't happen immediately too. One day bitcoin's price was 9K, then it went down to 3K in some hours and it happened in a post-halving period in 2020. Any logic there between the connection of supply/demand? Pure manipulation!

[Lee_Mire]

I would think "the real value of bitcoin" is most likely its production cost. In other words how much it costs to make mine each coin?

[BlackHatCoiner]

I am also not convinced that a "crypto winter" decreases the difficulty accordingly (in percents).

You mean a bear run? Surely not accordingly. There will always be miners that will find profitable to mine. Someone may had a $10,000 equivalent daily income and with the decline he'd earn $7,000. If we assume that he spends $5,000 for electricity everyday, he'll find it profitable to continue mining. But, my thoughts are that this is a minority of mining farms.

I don't believe that the security of a payment system has to do anything with its market value.

Pure manipulation!

That phrase is how I'd characterize the cryptocurrency industry in the last 2-3 years. There is, indeed, manipulation, but that affects directly the supply and demand. If we had 100 people wanting to buy 100 BTC for $1 each and suddenly, 300 newcomers realized that they can get rich from this thing, it'd increase the demand, whether they'd have been manipulated or not.

[raidarksword]

We still don't know the value of bitcoin because we cannot predict the price of it but time will only tell what's gonna be the ultimate price beholds for bitcoin. I am sure that bitcoin will stay forever and will dominate the financial aspects and continue to prosper the economy by eliminating poverty.

[boyptc]

It is like the other currencies that are depending on its value as per US' market and valuation of their dollar.

Most of our transactions will really have to be valued in USD or any local currencies that's also depending its value on USD. It's part of the market, the exchange rates.

But there will still be some markets that will have their conversion into 1 btc = 1 btc.

[AniviaBtc]

What do you mean by value? Is it the price of bitcoin in the market? or about its importance to us?

Bitcoin is volatile as it has limited supply if you read some information about bitcoin you should know that.

And for some investors, bitcoin means a lot to them as it makes them successful enough to have an investment that will possibly sustain their needs.

[odolvlobo]

I would think "the real value of bitcoin" is most likely its production cost. In other words how much it costs to make mine each coin?

Actually, it is the other way around. The production cost depends on the price due to the economics of mining.

Also, the value of a bitcoin is subjective -- different for each person. I think that price is an effective representation of the aggregate value assuming that the markets are liquid and efficient.

[hosseinimr93]

I am also not convinced that a "crypto winter" decreases the difficulty accordingly (in percents).

Correct.
While bitcoin price has decreased from 63,800 dollar to 37,500 (about 41%), the difficulty has decreased only about 14%.
Even when the price dropped to 3,200 dollar from 19,800 (about 83% decrease) in December 2017 - December 2018, the difficulty increased nearly 200%.

The difficulty has been increasing smoothly all the time.


Source: blockchain.com

[NeuroticFish]

I don't believe that the security of a payment system has to do anything with its market value.

I think that this is the central point of our disagreement.
I think that its security is one of the important features of the system, and all its features combined contribute greatly to its market value.
But I know that people cannot (and don't have to) agree on everything, so it's fine  

But, my thoughts are that this is a minority of mining farms.

The numbers posted by @hosseinimr93 (thank you!) show that it's not a minority.
So you are missing something in your logic. I can't tell clearly what though.
I am aware though that what I was saying is more "empirical" than based on clear numbers, so also far from perfect. The reassurance that came with the actual data afterwards was nice, but it doesn't change much (maybe that I have now "proof")

[OcTradism]

Value of Bitcoin is decided by many things that is changeable with time.

Total supply is fixed, unchangeable: at 21 million.
Demand is changeable and can be bigger in future.
Cost to produce new Bitcoin from mining: changeable with time, power cost, ASIC cost and with geo locations.
Fiat currency health: the worse health the fiat currency system has, the higher demand on Bitcoin that will bring Bitcoin to more expensive price.

You can not identify value of Bitcoin.

[kryptqnick]

Many places fix the price in fiat even when accepting Bitcoin because Bitcoin is very volatile, so it's just easier to recalculate the particular sum at the moment of the purchase, but put the price tag in a more stable currency. But the USD doesn't give any value to Bitcoin, of course, it's just a point of reference to assess its purchasing power. Scarcity and demand are crucial when it comes to constituting BTC value, and even though 1 BTC = 1 BTC, I think it matters whether it's 1 BTC you can buy a flat with or 1 BTC you can buy a plane ticket with.