True Value of BTC

[Montane]

Hi,

What is the true value of BTC. If we take aside supply/demand and focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Thanks

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[BitMaxz]

Actually, it won't get any value if there is no supply and demand traders and exchange is who decides how much the price of Bitcoin. There is no fixed price for Bitcoin.

If you talk about mining costs it depends on your Electricity rate and difficulty and the buyers if how much they want to buy your BTC.
You can't just calculate it without the price of BTC that is why there is exchange supply and demand who decide what will be the price of BTC.

[tabas]

Bitmax is right, without the supply and demand, bitcoin surely has no value. It's just the same as the other things that we posses, if it has no demand for it, there might be a value but eventually it will go to zero if no one's wanting it. It's the demand that drives the value of a thing and for bitcoin, it's obvious that there's a big demand for it. And about the mining cost, maybe some data you need is here: Here's how much electricity it takes to mine Bitcoin and why people are worried

[Darker45]

I guess it is false to equate production cost with the true value of something. There may be times when production cost is the primary consideration in giving something its reasonable price-- I'm not even speaking of true value-- but the moment the supply and demand factor does not cooperate, the production cost factor will have to give way. Such is the reason why there are instances in which goods are thrown away, left unharvested, sold at a loss, and so on. This is also the reason why certain factories, farms, manufacturing companies, and so forth face bankruptcy. The market has the strongest say in terms of value.

[DapanasFruit]

Anything will not any value if no one really cares about it. in fact, in the marketplace, there had been many good products (based on standards adopted) that eventually died because of the lack of demand. However, Bitcoin goes beyond the supply and demand thing...I would say that its value is based on the features it is offering. One, it is decentralized which means we are on the control and not anybody out there at the top who can even be unelected and can be unaccountable pulling the strings. Two, you can convert your money to Bitcoin and have it be transferred to anyone, anywhere in the globe at the least cost. Three, because of limited supply and the existing and presumably growing demand this is deflationary as a counter to fiat money which is always inflationary so in this case Bitcoin can also be considered as a good way to protect one's wealth - of course one can argue of its volatile nature so the solution is to hodl and never sell at a loss. There are many other factors but those can be technical and can be beyond my simple mind. In summary, to people who love Bitcoin and the ideas it represent BTC will always be valuable and to people who only see the "dark" side of it then it will just go away and be in the category of the Tulip Scam centuries ago. Now, the question is: Which side are you?

[franky1]

if there is no demand. EG bitcoin has no usefulness. then no one would use it, meaning no reason to mine it.
but bitcoin does have a use/purpose. so people do demand it. and so then the cost(value) then comes in because people ARE mining it

if gold could be mined in a backyard using nothing more then a spoon and a coffee filter for $2 an ounce. then the market would be about $2-$5
but because it costs over $900 to mine gold the market is $900-$2k
the 'supply/demand' speculation is not the $900 value. its the variable/volatile emotion of the above $900 part.
but underlying value/cost sets it at the least of $900 becasue thats the cheapest mining cost, no one wants to sell below

the simple calculation is find the most widely used ASIC details
        brand                    hashrate     electric     hardware cost               regional power cost
EG antminer S19pro      110thash     3.25kw     $12,000(2 year ROI)            $0.04/kwh

and the network hashrate say 195exa(195,000,000thash)
first calculate the asic cost
195,000,000/110=1,772,727 asics
then total up all the asic hardware cost
1772727 * 12000 = $21,272,727,272.73
then calculate the hardware cost per block
21,272,727,272.73 / 105000 = $202597.40       (bitcoin mines 210k blocks/4 years so 105k per 2year average ROI)

now for the electric
1772727 * 3.25 * 0.04= $230,454                 the electric used per hour for the network
then per block
230454 / 6 = 38409.085

then add hardware and electric.
38409.085 + $202597.40 = $241,006.48
now calculate per btc
$241006.48 / 6.25 = $38,561.04

ofcourse. the network hashrate is high in this example. as is the electric region low in this example. so adjust to better amounts.
EG todays 183exa hash is $36,188.05 for cheapest electric ($0.04)
EG todays 183exa hash is $83,768.05 for expensive electric (0.37)

no one mining can mine cheaper than $36k and no one mining can mine more expensive than $84k
and so al the emotional decisions to buy occur between $36k-$84k

for instance. japan/germany with highest costs wont mine for $84k if they can buy it cheaper
no one on planet wants to pay $84k if they live in america at 0.13 electric rate meaning they can mine it for $49k or just buy it for less. so even america would be hopping out of mining and just buying right now
kazahkstan and iceland can mine cheap so instead of buying they are mining.

and now you can understand why the "demand" of the PRICE is so volatile between the $36k-$84k'value-premium cost range'

[mk4]

Value is subjective, especially for things like bitcoin. If your thesis is that bitcoin would be used worldwide for SoV and currency, then obviously your opinion on it's "true value" is sky high from here. On the other hand if you think bitcoin is a scam or is useless, then obviously your opinion on it's "true value" is zero.

[pooya87]

focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Bitcoin is not a product that means that bitcoin price is not decided by its production cost.

What you are asking only works for products, like a car for example. They have a production cost and that decides what the finial value of it is. But in case of bitcoin the only deciding factor is the utilities that bitcoin provides and the supply & demand (or adoption) of it.

Even more interesting is that for bitcoin the "production cost" (ie. the mining cost) is decided based on bitcoin's price not the other way around.

[franky1]

Value is subjective, especially for things like bitcoin. If your thesis is that bitcoin would be used worldwide for SoV and currency, then obviously your opinion on it's "true value" is sky high from here. On the other hand if you think bitcoin is a scam or is useless, then obviously your opinion on it's "true value" is zero.

values(features and benefits) are the emotional choices of demand
value(cost cheap or premium) are the economic measures that can be quantified

yes many people see different values(F&B) and decide how much its worth to them emotionally and then tag on a price point they see as their values
yes different countries have different acquisition costs (buying or mining) and decide which is more value.

which explains the SPOT PRICE volatility within the economic value window

when bitcoins hashrate was averaging 150exa its economic value window was ~$30k-$70k
which is why with all the price swings. the price refused to go below $30k and the price refused to go above $70k

everything inbetween that bottom and upper economic value metric. is the speculative emotion of 'values(F&B)and other reasons for demand'

right now with the value window at upto $84k no one and i mean no one values bitcoin to be worth buying for $100k, because everyone on the planet can mine it much cheaper.

the hashrate and relative acquisition costs have to go up 20%+ as a minimum increase, before japan/germany will even consider buying the spot price in an upward trajectory to hit $100k.
an it would require double hashrate increase for america to consider buying upto $100k
an it would require triple hashrate increase for iceland/kazahkstan to consider buying upto $100k

[Wiwo]

Hi,

What is the true value of BTC? If we take aside supply/demand and focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Thanks

No asset will have value if there is no demand and supply, there won't be a need for bitcoin mining activities if the demand and supply are taken away because the will be zero transaction for the miners to confirm which automatically result in zero block reward for the miners so ultimately that can never happen.

[TinaK]

@franky1 explained it very well, thanks to him.

Make it simple, a simple answer is because the demand is the supply of which it trades that the seller is willing to sell and the buyer is willing to buy and that's how we determine the price of bitcoin. The good thing is bitcoin price didn't pegged to anything which means each currency has a different value.  So if the market which dollar has been used it should determine to the buyer that willing to buy.  

[Upgrade00]

Production cost is inefficient to represent the actual value of bitcoins. It would be possible to create a coin which lacks many of the features of Bitcoin, but is as difficult to mine; People would not buy this coin or token at an elevated value, simply because of the cost to produce it.

Bitcoin was created with unique features that makes it valuable and attracts the demand ebi h grows the price and that is more of an indication to the intrinsic value of Bitcoin.
The cost to mine bitcoins also varies with time and location making it rather difficult to get an exact price, you'll instead have a range of what the amount could be.

[mamesso]

Bitcoin price of course can experience up and down every day, bitcoin can increase to the highest price at any time, but it can also drop sharply to the lowest price (no price at all), This condition is called (price fluctuation).
What makes the price of bitcoin have value is supply and demand, bitcoin Cannot be controlled by Commodities Like fiat money. The mechanism of supply and demand for fiat money is always controlled by the central bank. This does not apply to bitcoin.
Until now, no particular authority has dared to intervene when there is an "unreasonable" supply and demand for Bitcoin. So for that reason it is not impossible that the price of Bitcoin could head towards the bubble if the demand is out of control.

About the amount it costs to produce 1 BTC in terms of mining costs, already explained in great detail by @franky1.

[KingsDen]

If we talk about true value, it is different from the value induced by cost of production. You might spend much in producing a product, but the product will not be of any value. Value is proportional to demand.
I will only demand for something that is valuable to me.
Then in the other hand, bitcoin is not a product.
Let us see bitcoin as a currency. So, can the value of US dollar be determined by the cost of printing it?
I believe that value according to cost of production is only applicable to the genesis and early mining stage of bitcoin.

[stompix]

no one mining can mine cheaper than $36k and no one mining can mine more expensive than $84k
and so al the emotional decisions to buy occur between $36k-$84k

Franky1 being Franky and again talking about things he doesn't have a clue about.

https://www.sec.gov/Archives/edgar/data/1874985/000121390022001845/fs12022a5_rhodium.htm#T17

Our infrastructure platform allows us to mine bitcoin at a significantly lower cost compared to the industry average. For the period from July 1, 2021 to September 30, 2021, our average electricity cost to produce one bitcoin was approximately $2,145.

https://www.globenewswire.com/news-release/2021/11/30/2342749/0/en/Bitcoin-Self-Miner-Griid-Infrastructure-to-List-on-the-NYSE-Through-Merger-With-Adit-Edtech-Acquisition-Corp.html

GRIID management reports that it has over 1,300 MW of power (under agreement, MOU or LOI), of which 734 MW will be operational by 2023, with a breakeven bitcoin production cost materially below its peers and a cost of scaled bitcoin production of under $6,225 per BTC.

https://www.datacenterdynamics.com/en/news/bitcoin-miner-marathon-signs-coal-fired-electricity-montana/

In the joint venture, Beowulf gets part-ownership of Marathon, but Marathon keeps the Bitcoin output from a data center that will use an estimated 37MW of power from Beowulf's 119MW Hardin Generating Station in Big Horn County, Montana. Marathon will pay $0.028/kWh for the energy, which is about a quarter of the average US domestic rate of around $0.11/kWh.

Should I post more?
Of course, all those mining companies are stupid and you know better than everyone by simply splitting the hashrate with the most efficient gear that this is the rule for everyone and that's it. At no point has in your little tired brain came the idea that some of the miners have long ROI with gear that was in place for years, so they could still afford to run it at a simple margin rate of 10% not even caring about stupid generalistic computations. There are poeple on this forum who have mined with that gear for 2-3 and even 4 years, they have ROI already and they couldn't care about those split costs of your, meaning that the actual pie for everyone else starting mining is far bigger.

Let's not even count the fact that in October 2020 the hashrate was 140exa, the price was 10k, how the fuck would that be possible with gear 3 times less efficient, the minimum cost per coin was 500K then?  

But I have to love the fact that you even dare to actually believe somebody is mining with 37 cents per kwh, because it makes so much sense!!!!

[virasog]

Hi,

What is the true value of BTC. If we take aside supply/demand and focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Thanks

The cost of mining is different in different areas and regions as mining cost depends upon a number of factors, the major one being the electricity cost. However, the true value of bitcoin is not calculated by average mining cost. If you calculate this price, it will be the minimum price of bitcoin and not the fair value. The true price of bitcoin is what people are willing to pay for, in order to buy bitcoin and this true value will increase with time as more people invest in bitcoin.

[KaliLinux]

Hi,

What is the true value of BTC. If we take aside supply/demand and focus on the amount it costs to produce 1 BTC in terms of mining costs, what is that value and how do we calculate that?

Thanks

The cost of mining is different in different areas and regions as mining cost depends upon a number of factors, the major one being the electricity cost. However, the true value of bitcoin is not calculated by average mining cost. If you calculate this price, it will be the minimum price of bitcoin and not the fair value. The true price of bitcoin is what people are willing to pay for, in order to buy bitcoin and this true value will increase with time as more people invest in bitcoin.

I definitely agree with you here because some days ago I read this post, https://bitcointalk.org/index.php?topic=5381365.0 Back then Bitcoin didn't have the type of value we see in it today hence the winner of the 25BTC did not accept them rather asked to be paid $40 instead. Source So it is safe to say that the true value of Bitcoin is what people are willing to pay which has been dynamic over time.

[Jawhead999]

There's no exact value of mining Bitcoin since it's vary by the difficulty, electric cost and mining rigs you used to mine. Back in the days where you can mine using CPU or GPU with low difficulty, but nowadays you need good rigs in able to mine it.

I'd say the mining cost isn't the true value of Bitcoin, it's different with production cost where the product isn't scarce and you can produce whatever amount you want. The true value of Bitcoin is 1BTC = 1BTC.

[Gyfts]

Seems like you're asking two different questions -- the costs associated with mining and the value of BTC within the context of mining costs...so you're essentially asking what the profit is?

There isn't anyone that can answer that -- BTC's price is not at a fixed position, setting aside the varying costs of mining. A bit of a pointless question to ask. The "true" value of BTC is not calculated by taking the asking price subtracted by the mining cost because you're assuming the asking price is fixed.

[Zilon]

First of all Bitcoin doesn't have a global adoption it value relies on the constant supply and demand of this said digital asset meaning if by chance investors decides to dump Bitcoin completely it would result to a 100% useless commodity same thing is applicable to legal tenders if the citizens decides to abandon it, it losses its value completely