Fair Price of Bitcoin: $518?

[pawel7777]

Just came across this article on Coindesk:

http://www.coindesk.com/is-518-the-fair-price-of-bitcoin/

According to Alfaquotes, Bitcoin is currently undervalued, its 'fair price' (using the Benjamin Graham formula as a model) is at $518.59.

Calculating a ‘fair’ price

Hertz explained that the fair price formula includes two factors.

First, it calculates the changes in the cost of mining equipment and its performance. Next, it attempts to assess the change in difficulty of production, factoring in the electricity costs faced by miners on the network.

In particular, Hertz indicated that the fair value tool should be embraced by miners, as the price today is lower than the fair price – a factor he attributes to the recent string of bankruptcies and closures in the sector.

Hertz predicted that this trend is likely to continue until issues faced by the mining community affect supply to the point it influences demand.

“At the moment, as we can see bitcoin is doubly underestimated and this indicates how good investment attractiveness is toward bitcoin,” Hertz added.

Considering current price it sounds like a good news, but I'd love to see the detailed calculation.


Related links:

http://www.ibtimes.co.uk/cryptocurrency-round-bitcoin-price-continues-surge-towards-fair-price-1490237

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

[1715077237]

1715077237

[Beliathon]

Fair price for 1 satoshi in fiat scrip is this:



It is unethical to endorse violence-backed fiat by accepting it in trade for private keys.
In rational self-interest terms, it is also quite stupid to accept the value of national fiat for everyone except the people printing it and their close friends.

The miracle of fiat is that the governments of these nations have convinced millions of people that they are their close friends. The miracle is that people believe this.
The miracle of bitcoin is that it represents mathematically provable truth based money. This antidote is being injected into a society of deceit.

[ebliever]

Is it just me, or did this "Fair Price" calculation use the Labor theory of value? That's the discredited Marxist notion that the value of an item is based on the amount of work to produce it. For example, if we could somehow assign my labor a value of $10/hour, and I spent 100 hours hacking at a hunk of rock with a chisel, the resulting sculpture would be supposedly valued at $1000 - even if it was an unrecognizable mess (which is what I would expect).

Assigning value to bitcoin based on the costs involving in mining it is going at it backwards, IMHO.

[1Referee]

Bitcoin isn't undervalued at all at this point.

Bitcoin is a free market, no matter how many formulas and calculations you throw at it, it are the whales, pools and for a part we that decide the price.

After everything that has happened this year it is safe to say that we are heading towards a price that we agree with that this is the right price now.

[Btcvilla]

$518 would be a great price for Bitcoin, but I think being stabled at $350 would be more likely.

[neoneros]

Is it just me, or did this "Fair Price" calculation use the Labor theory of value? That's the discredited Marxist notion that the value of an item is based on the amount of work to produce it. For example, if we could somehow assign my labor a value of $10/hour, and I spent 100 hours hacking at a hunk of rock with a chisel, the resulting sculpture would be supposedly valued at $1000 - even if it was an unrecognizable mess (which is what I would expect).

Assigning value to bitcoin based on the costs involving in mining it is going at it backwards, IMHO.

Might be backwards to you, but the cost of mining is what at the moment determines the value of bitcoins. The miners spend X amount on the mining rigs and expect X+profit for the coins they mine.

Love your take on the Labor theory

[Btcvilla]

Its hard to give a stable price to bitcoin. Sometimes I used to think 100$ would be it. But hard to put a price on it.

A stable price of $5000 would be great to, but we should try to focus on a realstic price, like $350-$550.

[RodeoX]

The market disagrees. And since only the market counts, the price is about $280 at this point.

[HarmonLi]

Depends on when... The price is still going up strongly in the long term. We're (still) experiencing an exponential growth at this point. And Soon we may be seeing an increase of the 'real' price of $500 per year, or even per month!

[BitCoinNutJob]

Just came across this article on Coindesk:

http://www.coindesk.com/is-518-the-fair-price-of-bitcoin/

According to Alfaquotes, Bitcoin is currently undervalued, its 'fair price' (using the Benjamin Graham formula as a model) is at $518.59.

Calculating a ‘fair’ price

Hertz explained that the fair price formula includes two factors.

First, it calculates the changes in the cost of mining equipment and its performance. Next, it attempts to assess the change in difficulty of production, factoring in the electricity costs faced by miners on the network.

In particular, Hertz indicated that the fair value tool should be embraced by miners, as the price today is lower than the fair price – a factor he attributes to the recent string of bankruptcies and closures in the sector.

Hertz predicted that this trend is likely to continue until issues faced by the mining community affect supply to the point it influences demand.

“At the moment, as we can see bitcoin is doubly underestimated and this indicates how good investment attractiveness is toward bitcoin,” Hertz added.

Considering current price it sounds like a good news, but I'd love to see the detailed calculation.


Related links:

http://www.ibtimes.co.uk/cryptocurrency-round-bitcoin-price-continues-surge-towards-fair-price-1490237

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

Depends by what time frame we could be at that price in 2 weeks really, bitcoin can move so fast, perhaps that is the fair price, perhaps its even higher.  If bitcoin didnt move so fast this would be easier to dismiss.

[sakira]

yes after the highest reaches $1000, I thought it was a fair price, half the price of the highest prices in 2013  

[Beliathon]

A stable price of $5000 would be great

Don't count on Bitcoin having price stability at $5,000, or any other amount measured in fiat.

[Btcvilla]

A stable price of $5000 would be great

Don't count on Bitcoin having price stability at $5,000, or any other amount measured in fiat.

Mabey with enough time and fiat inflation it will reach $5,000 one day

[xuan87]

$518 would be a great price for Bitcoin, but I think being stabled at $350 would be more likely.

Usually the price stable on $350 and for now the price is keep increasing.

Maybe it can reach $ 500++ but for not a long time

[coinpr0n]

The thought of the price of Bitcoin being stable is a sad one. I don't know a thing about this model, but life doesn't tend to be fair.

[Btcvilla]

$518 would be a great price for Bitcoin, but I think being stabled at $350 would be more likely.

Usually the price stable on $350 and for now the price is keep increasing.

Maybe it can reach $ 500++ but for not a long time

I hope by the end of the year it would be around $500, but it may take even longer to recover from 2014.

[OpenOcean]

It honestly depends on how close we attribute Bitcoin to gold.

Gold can only be predicted with respect to total store, and potentially chemically recreated one for mass production (bear with me on the Sci-Fi a little, I know it may sound stupid, but there is a point - even if it may be incorrect).

Knowing that gold's future supply is variable (as we we use the rate at which we mine it, and the amount we have mined at this rate to predict further stores, AS WELL as the sci-fi point mentioned above), we have to stipulate that Bitcoin has a different context surrounding its valuation.

We know how many maximum bitcoin there will be (in real terms obviously, not nominal terms), we also know that LESS THAN all bitcoin will be recovered (due to losses of wallets and etc.). This FIXED and SMALLER supply has a much different future discount property than the variable nature of what we might perceive our perpetual gold stores to be in the future (again, if we can manufacture that stuff, the model of comparison breaks down).

At this point, to keep it simple and not foray into the territory of delusion (aka my sci-fi comment), we should just take it that the fair value is unknown and that the gold comparison is too linear.

I will add in my opinion that I believe bitcoin is undervalued for the fact that there has been more activity in the sphere despite the lower price, and that if you aggregate the salaries of the talent pursuing the industry as well as the opportunity costs of the venture capitalists supporting them, then the price of bitcoin is not as high as it should be. Furthermore, there is a higher level of acceptance for bitcoin from big 1% companies (microsoft for example) than there was at the same time last year when the price was higher. Add to this that the current drop in price since December 2013 though large, in relation to prior drops (I remember when it went to $8 like two-three years ago) is actually smaller in magnitude and therefore implies a lesser degree of volatility.

That's my two cents, please give me some activity points LOL.

[leex1528]

I don't quite understand how people think that Bitcoin is worth more than what you can buy it for at any given time.  I just think of say like a gas station, if they said, well actually the gas price is 3 dollars more than what is posted outside, we are going off speculation here, how many people would actually pay that?  They wouldn't, they would go to the next gas station forcing that gas station to lower its price.  Just like Bitcoins.  No one is going to buy for that much when they can buy for half the cost of it.  Thus the speculation will have to change.

[opossum]

The thought of the price of Bitcoin being stable is a sad one. I don't know a thing about this model, but life doesn't tend to be fair.

I'd like the price to be stable for a longer while and i'm sure all business owners would appreciate it.

Of course they would prefer it, all currency at the start of it's life is going to be extremely volatile though just take a look at the past and you will see, the thing is it will stabilize in time maybe when we have enough user adoption but there will always be those that manipulate the price unfortunately. Is manipulation the reason why the price is said to be low? I am not sure i very much doubt it is low to be honest the market is a free market and will give the price it thinks is fair not someone writing an article.    

[fildza]

Its hard to give a stable price to bitcoin. Sometimes I used to think 100$ would be it. But hard to put a price on it.

A stable price of $5000 would be great to, but we should try to focus on a realstic price, like $350-$550.

$5000 stable price is just a sweet dream and I don't think the price will go there but I hope the price become stable at around $500