help me understand how is btc value fixed

[albert11]

I m a bit confused on how btc value is fixed.

From what i understand trade exchanges plateforms fix the rates but i have a few questions

- how exactly are people aware what goes on in these markets? how can someone know exactly how many buys/sells there are on localbitcoins for instance and then move the value of btc in real time according to the trades going on, how can we be sure that owner is giving correct info? is this info even relayed by the owner to another instance that fixes the price ?

- i see on this chart http://bitcoincharts.com/markets/  the value of btc on localbitcoins is much higher than other markets so why is the real value closer to other markets than lcbtc?

- there are a lots of markets (over 30) so wondering who is fixing the btc value? is this an average of all these markets?

- i have also noticed that the value changes proportionally to other markets, when one goes up every other up,one down every other down how comes? these markets are seperate so the value of btc should be unique to each market and difference between them should be much bigger?

im rather new to bitcoin so some of my questions may sound a bit silly, also my grammar is not perfect as im not english

thanks for any answer

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[Blazr]

Nobody fixes the value of bitcoin. People go onto exchange and place orders like this:

I am willing to sell 10BTC for a minimum of $10/BTC
I am willing to sell 1BTC for a minimum of $11/BTC

I am willing to buy 5BTC for a maximum of $9/BTC
I am willing to buy 11BTC for a maximum of $10/BTC

The exchanges then match up buyers/sellers and whatever a Bitcoin sells at becomes the current "market price". There is no "fixed" value, the value is slightly different on different exchanges. Simply put the value of a Bitcoin is what someone is willing to pay for it.

Have a look at the order book on BTC-e:
https://btc-e.com/

It will help you understand more. This is how all currencies are priced.

[doof]

Nobody fixes the value of bitcoin. People go onto exchange and place orders like this:

I am willing to sell 10BTC for a minimum of $10/BTC
I am willing to sell 1BTC for a minimum of $11/BTC

I am willing to buy 5BTC for a maximum of $9/BTC
I am willing to buy 11BTC for a maximum of $10/BTC

The exchanges then match up buyers/sellers and whatever a Bitcoin sells at becomes the current "market price". There is no "fixed" value, the value is slightly different on different exchanges. Simply put the value of a Bitcoin is what someone is willing to pay for it.

Have a look at the order book on BTC-e:
https://btc-e.com/

It will help you understand more. This is how all currencies are priced.

Its purely supply and demand.  The price is set at the equilibrium.  Prices vary on different exchanges, because those exchanges have different properties.  For example, its hard to withdraw fiat out of BTC-e.

[franky1]

the true value of bitcoin is based on the cost of production.
in short:  no one wants to sell at a loss, and if they do, they are idiots.

however too many people are sheep following exchanges which are all controlled by a high percentage of bots. doing small orders.
in short: sheeple following the movements of just a few hundred bitcoin being repeatedly bought and sold over and over. rather than the near 14 million actual supply.

for example.
someone else mentioned BTC-e.com so lets use that.

out of 42 orders showing. 39 are less than 2btc. leaving just 2-3 orders (normally owned by just one person) being super large in comparison, to control the direction of trades



we are long past the days when 500 bitcoins were being traded every 15 minutes.
we are long past the days when people trusted exchanges to hold large hoards.
we are long past the day where we should be using these crappy exchanges as value indicators.

[albert11]

hey thanks for your answer, it clears up many of the questions i had, i actually thought blockchain,info value was the "universal" BTC value, i feel pretty dumb now.

but i still don't understand how can all these markets have roughly the same average amount of buy and sell simultaneously ? maybe it is self correcting itself somehow?

[Blazr]

hey thanks for your answer, it clears up many of the questions i had, i actually thought blockchain,info value was the "universal" BTC value, i feel pretty dumb now.

but i still don't understand how can all these markets have roughly the same average amount of buy and sell simultaneously ? maybe it is self correcting itself somehow?

Yes, because if it differs too much, people will buy on one exchange and sell to another and make profit. This is called arbitrage.

[albert11]

hey thanks for your answer, it clears up many of the questions i had, i actually thought blockchain,info value was the "universal" BTC value, i feel pretty dumb now.

but i still don't understand how can all these markets have roughly the same average amount of buy and sell simultaneously ? maybe it is self correcting itself somehow?

Yes, because if it differs too much, people will buy on one exchange and sell to another and make profit. This is called arbitrage.

yeah the price difference between btc-e and localbitcoins is pretty big 30$ for 1 btc, do you think that's what people are doing like buying on cheap ones and selling where the price is expensive? it sounds like easy money doesn t it?

[albert11]

the true value of bitcoin is based on the cost of production.
in short:  no one wants to sell at a loss, and if they do, they are idiots.

however too many people are sheep following exchanges which are all controlled by a high percentage of bots. doing small orders.
in short: sheeple following the movements of just a few hundred bitcoin being repeatedly bought and sold over and over. rather than the near 14 million actual supply.

for example.
someone else mentioned BTC-e.com so lets use that.

out of 42 orders showing. 39 are less than 2btc. leaving just 2-3 orders (normally owned by just one person) being super large in comparison, to control the direction of trades



we are long past the days when 500 bitcoins were being traded every 15 minutes.
we are long past the days when people trusted exchanges to hold large hoards.
we are long past the day where we should be using these crappy exchanges as value indicators.

you made a good point

i am wondering how can these small orders have any repercussions on the value if they are of very low volumes? why are they using bots?

[jonald_fyookball]

the true value of bitcoin is based on the cost of production.

The cost of production is based on the value, more than the other
way around.

One could argue that its a circular process, but ultimately
it is supply and demand that are primary...Everything else
follows.

For example, demand goes up, driving price up, more people will
become miners to compete, driving the cost of
production to marginally near the value.

[gadman2]

hey thanks for your answer, it clears up many of the questions i had, i actually thought blockchain,info value was the "universal" BTC value, i feel pretty dumb now.

but i still don't understand how can all these markets have roughly the same average amount of buy and sell simultaneously ? maybe it is self correcting itself somehow?

Yes, because if it differs too much, people will buy on one exchange and sell to another and make profit. This is called arbitrage.

yeah the price difference between btc-e and localbitcoins is pretty big 30$ for 1 btc, do you think that's what people are doing like buying on cheap ones and selling where the price is expensive? it sounds like easy money doesn t it?

Btce has quite large fees.

[flipstyle]

It's a trade off.

Just like selling tangible goods on ebay vs. craigslist.  You pay fees on ebay, but you also get a much much larger target audience so you could get more for an item.

Craigslist you might get more for the same item in person for cash, but the time spent to drive out/deal with possible no-shows almost cancels out the ebay fees.

[nikona]

the true value of bitcoin is based on the cost of production.
in short:  no one wants to sell at a loss, and if they do, they are idiots.

however too many people are sheep following exchanges which are all controlled by a high percentage of bots. doing small orders.
in short: sheeple following the movements of just a few hundred bitcoin being repeatedly bought and sold over and over. rather than the near 14 million actual supply.

for example.
someone else mentioned BTC-e.com so lets use that.

out of 42 orders showing. 39 are less than 2btc. leaving just 2-3 orders (normally owned by just one person) being super large in comparison, to control the direction of trades



we are long past the days when 500 bitcoins were being traded every 15 minutes.
we are long past the days when people trusted exchanges to hold large hoards.
we are long past the day where we should be using these crappy exchanges as value indicators.

Completely agree with the last 3 lines...Long past those days..!! I dont keep any BTC in the exchanges...I just put it in when I want to sell.!

[gjgjg]

you might find this article interesting, btc is not so different to other markets, and the reasons price is what it is can be pretty complicated (or simple lol)

http://en.wikipedia.org/wiki/Price_discovery

[wilth1]

The cost of production is based on the value, more than the other
way around.

So what is Bitcoin's value proposition at present?  What are its real fundamentals?

Despite its speed and efficiency as a transfer mechanism, its main selling point right now appears to be as a speculative volatility technology.

[jonald_fyookball]

The cost of production is based on the value, more than the other
way around.

So what is Bitcoin's value proposition at present?  What are its real fundamentals?

Despite its speed and efficiency as a transfer mechanism, its main selling point right now appears to be as a speculative volatility technology.

also:

Control over your own money.
Low fees.
Privacy.
Identity theft protection.
Hedge against fiat inflation.