True Value of BTC

[Poker Player]

Surely the OP is familiar in some way with the concept of fair or objective value that is applied to companies to calculate the value of shares and buy or sell accordingly. Broadly speaking, you account for the assets and liabilities of the company, taking into account some other things (like sales performance over the last 5 years, and some projections) to calculate a value that divided by all the shares of the company tells you whether to buy or sell.

But Bitcoin is essentially different in this sense, as already noted. We cannot calculate a true value with which to know if Bitcoin is overvalued or undervalued at the moment, for that there are other indicators, such as the fear and greed index and others, but for those of us who believe that the Bitcoin will play an important role in the history of mankind and therefore in the long term will rise a lot in price, Bitcoin is always undervalued.

[franky1]

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.

funny thing is..
for years i have been running charts of the cheapest and most expensive mining costs.. and treated that as a value window.
and in 99.99% of chart plots the price sits within the mining cost value window.

check one example recently
https://bitcointalk.org/index.php?topic=5382559.msg59053731#msg59053731
the blue and purple line is mining cheap-premium. and if you look at the peaks and valleys of mining cost. and then look forward a few days,weeks the price then follows with a peak or valley.

this is because when it costs more to mine, for instance in USA than the price is. hobby miners switch off their asics to then buy. which then makes the price rise with the mining cost.

when its cheaper to mine than the price. people turn on their miners and stop buying.
check out the april mining cost dip. and then the price dip in may
check out the june mining dip due to china.. and then the price dip in july

yes the november 2021-jan2022 is a bear sign where prices decrease even when the costs dont, but that shows the cheapest miners remained bullish from jun-december even with a market being bear november-december.. but even so even now today the price sits within the value window of cost. the bottomline blue are the cheapest miners on the planet and they only react when their profit margin gets small. they dont react daily, weekly monthly they only started reacting in january this year and only a small amount of them cheap asics miners reacted

[kryptqnick]

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.

But even the value of a product isn't based fully on production cost. Take GPUs, for example. It can cost, say, $400 to manufacture (including salaries and stuff), it can allegedly be sold (MSRP, I mean) for $750, but actually cost $1800 on the market. So even for products there's a great gap between the production cost and the product's value. So with Bitcoin I guess it's just exacerbated because the demand and supply play an even bigger role, but it's not like a product is defined by its production cost either.

[The Cryptovator]

The Value and the Price aren't the same things. Most likely you mixed it. The value of Bitcoin totally depends on how people are adapting it and how the community growing. It's because Bitcoin is a decentralized cryptocurrency backed by the community. As much as the real use case increase, the value increases as well.

On the other hand, price fully depends on demand and supply. Nothing to do with the mining cost. Miners are making a profit, so whatever the cost it won't hire than the price they earn. Price always moves based on buyer and seller emissions.

[wxa7115]

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

You are looking at this from the wrong perspective, it seems that you think that just because something costs X to produce then that is its value, but things do not work like that, that is the labor theory of value which is closely related to communist ideas, but this is wrong, just take a look at shitcoins, it takes you a certain amount of money to mine them, however if the development is awful then you will never recover your investment, it does not matter how much money you spent you will never recover it as the coin was not worth it.

So it does not mater how much money was necessary to mine a bitcoin, the value of bitcoin, and anything else by the way, depends on how much people are willing to pay for it.

[pooya87]

funny thing is..
for years i have been running charts of the cheapest and most expensive mining costs.. and treated that as a value window.and in 99.99% of chart plots the price sits within the mining cost value window.

Funny thing is that you are using numbers that satisfy your conclusion otherwise as I've told you elsewhere and you ignored it the cheapest electricity cost is $0.002/kwh in other words your minimum is 20 times higher than the actual minimum.

this is because when it costs more to mine, for instance in USA than the price is. hobby miners switch off their asics to then buy. which then makes the price rise with the mining cost.

You are ignoring the size of the market. There aren't enough "hobby miners" that would buy bitcoin in your scenario to have any kind of effect on the price.

[odolvlobo]

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.

I feel that just saying that Bitcoin is not a product doesn't really explain it. The price of a bitcoin is not influenced by its production cost because production is fixed. Producers (miners) can't adjust production in response to price, so they have no influence over the price, in contrast to most other products.

I also want to point out that value and price are different, but related. Value is subjective. The value of a bitcoin is higher to a person that wants to buy it than to a person that wants to sell it. Price is an objective measure of the aggregate value.

[coinycoiny]

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

It's the same as ethereum and dogecoin.

Not sure if its more or less than an NFT

[dezoel]

The value for most things usually comes from the demand and supply. But, if you should take away the demand and supply, maybe we would say that the value should come from the cost that it takes to produce that product. So, maybe we can use another product in this context, let’s say for example a bottle of coke: if we are to say what’s the value of a bottle of coke, then we would have to talk about the ingredients that were used in making that coke, and if what it cost to make that Coke was $10, maybe we can say the value is $10 , because that’s what it cost to produce it.

And if you are going to sell it, you already know for sure that you wouldn’t be selling it anything below that $10, if you do, then it’s going to be a loss for you. So for Bitcoin, we can say that the cost for mining one Bitcoin should be the value for it I guess. But at the end, if something doesn’t have demand, then it’s of no use.

[jaberwock]

Surely the OP is familiar in some way with the concept of fair or objective value that is applied to companies to calculate the value of shares and buy or sell accordingly. Broadly speaking, you account for the assets and liabilities of the company, taking into account some other things (like sales performance over the last 5 years, and some projections) to calculate a value that divided by all the shares of the company tells you whether to buy or sell.

When you talk about the sales performance, then you are still talking about the demand and supply that the OP had said to be removed. In this case, I wouldn’t say that shares is the right thing to be using as an example, because shares are basically all about the level of demand and supply or should I say sales performance in a company, and the shares in a company wouldn't have any value at all if there are no sales performance or demand and supply in that company.

But in Bitcoin, you have to mine it which means that it is quite different. Before you mined it, there were things involved. Will say that Bitcoin is like gold, what does it cost to mine a gold?

[24Kt]

Surely the OP is familiar in some way with the concept of fair or objective value that is applied to companies to calculate the value of shares and buy or sell accordingly. Broadly speaking, you account for the assets and liabilities of the company, taking into account some other things (like sales performance over the last 5 years, and some projections) to calculate a value that divided by all the shares of the company tells you whether to buy or sell.

When you talk about the sales performance, then you are still talking about the demand and supply that the OP had said to be removed. In this case, I wouldn’t say that shares is the right thing to be using as an example, because shares are basically all about the level of demand and supply or should I say sales performance in a company, and the shares in a company wouldn't have any value at all if there are no sales performance or demand and supply in that company.

But in Bitcoin, you have to mine it which means that it is quite different. Before you mined it, there were things involved. Will say that Bitcoin is like gold, what does it cost to mine a gold?

That kind of valuation is hard as there are many factors to consider. The labor, equipment, taxes, etc. In terms of gold price, the mining cost has long been established and they just add other things on top of the basic mining cost. Aside from that, the supply and demand finally determines the price. So maybe, the OP is asking about the cost of equipment, energy consumption, labor on how to mine for example 1BTC. But this one depends also on what miner you will use, how long you will mine (energy consumption), people involved, and tax. In that case, maybe the OP wants to calculate this via mining calculators like - https://whattomine.com/.

[Odusko]

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

To know the value or worth of any commodity demand and supply is important ,because is when there's demand that producer will produce more good and supply them. And for bitcoin it will be difficult to calculate the value because the price is not stable,well the miners may be able to calculate the cost of mining by calculating cost of electricity or fuel for generator,or any other thing they use for the mining.