How to price a Bitcoin?

Question

What method do you use to price / value a bitcoin?

You use discounted cash flow for a stock, what methods do you know to price a bitcoin?

This guy shows some ideas: https://www.youtube.com/watch?v=iqyLByXUksg&list=WL&index=22

Answer 1

Bitcoin has no "inherent" value; it is a currency. Value is therefore subjective, and can only be discovered when you attempt to convert a bitcoin into some other currency or good.

In a free, unmanipulated market, the "price" of a currency operates by seeking equilibrium between buyers and sellers. If there are more sellers than buyers, the price will drop. Conversely, if there are more buyers than sellers, the price will rise.

If demand for bitcoin drops radically, and the price declines in the same manner, it may become extremely difficult to "get out" of bitcoin since transactions rely on being "confirmed" by mining nodes. Mining nodes only perform mining activities when the financial incentive is bigger than the cost of performing that mining. You can see the current "price" of a transaction in various places, including https://bitcoinfees.earn.com/ and https://statoshi.info/dashboard/db/fee-estimates among others. The function of price-for-confirmation is a combination of how much you, and others, are willing to pay for confirmation, how many confirmations are in the queue, and how the price of bitcoin compared to the input costs of running mining, such as electricity and the cost of mining rigs. So, if the price is declining, and many people sell causing a lot of transactions, you will need to spend more than everyone else on transaction fees; this could very quickly cause an escalation of fees, and could be considered one of the bearish cases for this cryptocurrency. Do not put more into bitcoin than you can stand to lose, which is of course good advice for any risk.