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For example, if it is stock, there can be P/E ratio, or Price Sales ratio. For Bitcoin, are there some common ways people use to estimate the value of one Bitcoin?

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    What do you mean by value if not exchange rate? If it is something else, can you clarify what? For example, what would the value of the US dollar be? – Pieter Wuille Jan 25 at 6:40
  • that's true... should we estimate the value of a Bitcoin like a stock or like a currency? But either way, what are some factors that can tell or give suggestions as to its proper value? – nonopolarity Jan 25 at 11:45
  • reddit.com/r/bitcoinmarkets better place for price speculation – Prayank Jan 25 at 11:58
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    @nonopolarity I still have no clue what you mean by "proper value" that isn't its exchange rate. If you're talking about something other than an exchange rate, can you give an example for another currency? – Pieter Wuille Jan 25 at 18:59
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Unlike stocks or precious metals, Bitcoin has no inherent value; it is only worth what people are willing to pay for it, and the only way to determine that is through trading activity on an exchange.

You can try to use the same technical analyses that are used on the stock and forex markets to predict the future price, but it's incorrect to call that its "proper value".

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  • Unlike stocks or precious metals, Bitcoin has no inherent value; it is only worth what people are willing to pay for it, This is not true unless you have any data to back your arguments/opinion – Prayank Jan 25 at 11:16
  • @Prayank You can assign an inherent value to a company's stock by looking at things like the value of assets the company owns, the profit it earns, etc., and when people say "this company is over/undervalued" they mean the stock price doesn't reflect this reality. Gold has inherent value as a non-corrosive component in electronics, even if people stopped wanting to trade gold. If nobody wanted to buy or accept your Bitcoin for products anymore, what else can you do with it? – ieatpizza Jan 25 at 11:42
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    @nonopolarity Sure, so then again, the price is just based off of what others are willing to pay for it. If I had 100 tokens and people were willing to exchange 1 token for 1 pizza, then the value of 1 token is 1 pizza. If these same tokens were owned by rich people who were willing to exchange 1 token for 1 sports car, then the value of 1 token is 1 sports car. But note that the value is still, only what others are willing to trade for it, and on its own the tokens aren't worth anything, and therefore there's no such thing as "proper value" of the token. – ieatpizza Jan 25 at 11:57
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    @Prayank Okay, so a company that has 0 valuable assets and 0 profit has 0 "inherent value". People might still want to trade the stock for whatever reason (maybe they got lied) and then we would call it grossly overvalued, because the price it's trading at doesn't reflect its inherent value. You are right, the USD also is only worth as much as people are willing to accept for it. If nobody wanted to accept USD anymore, the value of USD goes to 0. You can see something similar happening in countries that are experiencing extreme inflation: the money is worth less than the paper it's printed on. – ieatpizza Jan 25 at 12:02
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    @nonopolarity In your hypothetical these tokens again only have value because people are willing to trade for them. If I were a billionaire and I had a bunch of play tokens that nobody was willing to pay anything for, the tokens are still worthless, despite my own personal net worth. If my assets were made entirely of these tokens, I'm not a billionaire unless someone else in the world would be willing to buy my tokens for $1B. – ieatpizza Jan 25 at 12:05
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Like most other forms of money, bitcoins don't have any intrinsic value. Unlike commodities, they do not have material value and they cannot be used in manufacturing, and unlike stocks, bitcoins don't represent assets or shares of some entity. Bitcoins are a purely digital good that represents nothing but itself and therefore has only relative value. In fact, some argue that the absence of intrinsic value makes bitcoins an outstanding candidate for money. Given that, I'm not sure whether it makes sense to distinguish between price, value, and purchasing power of bitcoins.

The price of bitcoins is discovered on the market: the current price is that of the latest trade that a buyer and a seller agreed on. The price is updated whenever the highest bid and the lowest ask intersect.

I said proper value, because, imagine each person has 3 tokens, and is used among homeless people, and their net asset is $10, I think 1 token might be worth $1 or something? They care about $3 of liquid asset, and perhaps the 3 tokens represent the $3. Likewise, if the 3 tokens belong to people whose net asset is about $20 million, then it can be the liquid asset they can think of moving around is $1 or $2 million, so each token can be worth $300,000, and like you said, is a sports car

The price discovery is independent of the wealth of the market participants since the bitcoins do not represent their other assets in any way. Even high-net-worth individuals (HNWI) can only influence the price through the market. One could argue that people whose wealth is mostly made up of Bitcoin may be more likely to sell some to diversify or cover expenses, while the general wealth of HNWIs protects them from being forced to sell. Possibly, HNWIs may also be willing to pay more for bitcoins than other market participants. As such, HNWIs may contribute more to a rising price than other market participants, but I still don't see how the price of bitcoin would be a function of the general wealth of Bitcoin holders.

That being said, some bitcoiners speculate on the price by assuming which other uses of money or gold it may replace. An example is Vijay Boyapati's description of four valuation frameworks for Bitcoin. Various banks have published research modeling Bitcoin's future value. For example, a Citibank analyst made news in November with their price prediction.

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  • What is "Intrinsic Value" ? What is "Physical Value" ? Explain "industrial use" because there are few industries using bitcoin for different things – Prayank Jan 25 at 15:52
  • I've updated the first paragraph to rephrase that passage. – Murch Jan 25 at 16:17
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    @Prayank Okay, so... The concept of blockchain technology is inherently valuable, in that even if Bitcoin itself one day went to 0, the concept of blockchains as a data structure and the concept of a decentralized timestamping mechanism still have valuable uses in software. But note that the value of these concepts are independent of the value of Bitcoin itself... you don't necessarily need to use Bitcoin to use them. – ieatpizza Jan 25 at 16:26
  • Chain of blocks alone doesn't mean anything. Bitcoin is more than a chain a blocks. For everything that happens on-chain you need to pay fees and it will be paid in BTC. We have not even seen what all is possible on layer 2 sidechains and LN which are dependent on Bitcoin. So this question and all the answers are just opinion and would have been closed by now as "opinion based" but maybe people are interested in discussing. Anyways it's a waste of time and there are better and important things to discuss and improve in Bitcoin. – Prayank Jan 25 at 17:34
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For Bitcoin, are there some common ways people use to estimate the value of one Bitcoin?

Markets decide the value of bitcoin in terms of currencies like USD, EUR, INR etc. Markets are based on supply and demand for everything that exists on this planet.

Stocks or metals have a certain value because people are willing to pay that amount for it. All the fundamental and technical analysis followed by different systems exists in Bitcoin markets as well with different data. At the end of the day everything depends on supply and demand. If there are more buyers and less sellers price goes up, and down if vice versa.

If interested to look at different charts for research:

https://www.lookintobitcoin.com/charts/

https://studio.glassnode.com/dashboards/btc-core-on-chain

https://insights.braiins.com/cost-to-mine

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  • that's true, ultimately it is by supply and demand... so I think the question is, what causes a change in its supply and what causes a change in its demand, and those factors also might be related to the current price it is at – nonopolarity Jan 25 at 11:47
  • Supply is almost decided by now and wont change unless there is hard fork and extra ordinary things happening which makes people consider such changes and no issues in consensus. Demand changes based on so many things and its market is following cycles like few other markets although relatively new and unique. I shared few links which will help you understand data related to bitcoin if looking for research and analysis. If trying to predict something, not sure I can help with it. – Prayank Jan 25 at 16:01

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