<p>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.</p>
<p>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 &quot;proper value&quot;.</p>

CC BY-SA 4.0
2021-01-25T11:42:20.717Z
@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
CC BY-SA 4.0
2021-01-25T11:53:21.993Z
I think you can say Bitcoin has no inherit value... but think of people having some "tokens" which they can exchange for some goods (like seashell long time ago)... if each person has 100 tokens and they commonly exchange it for a pizza, that establishes its commonly perceived value. But if each person only has 3... then maybe they rarely use it, and treasure it, and so it can be worth a bicycle or something. Also think about if each person only has 3 tokens, and it is among the very rich people, then it probably is worth a lot more
nonopolarity
CC BY-SA 4.0
2021-01-25T11:57:09.707Z
@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
CC BY-SA 4.0
2021-01-25T12:02:28.090Z
@ieatpizza 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
nonopolarity
CC BY-SA 4.0
2021-01-25T12:02:39.537Z
@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
CC BY-SA 4.0
2021-01-25T12:05:16.357Z
@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
CC BY-SA 4.0
2021-01-25T12:21:21.620Z
@ieatpizza See, that's why I said there seems to be a way to estimate a proper value. You just said if 1 person owns all tokens and even if it is a billionaire, it is worthless, what did you do? Didn't you just give the token a "proper value"?
nonopolarity
CC BY-SA 4.0
2021-01-25T12:26:21.020Z
@nonopolarity No. The key part is *"tokens that nobody was willing to pay anything for"*.  Anyways I'm also getting bored of this discussion since I feel like I'm just repeating myself now.
ieatpizza
CC BY-SA 4.0
2021-01-25T16:17:13.200Z
@ieatpizza You could at least burn dollar bills to keep warm or melt coins down to their useful elemental metals, so physical currency would still have minimal value even if no one wanted to trade. If no one wants to buy your Bitcoin, however, I can't think of a single useful thing you could do with it, meaning its value truly is zero.
Nuclear Hoagie
CC BY-SA 4.0
2021-01-25T06:41:54.957Z
2021-01-25T06:41:54.957Z
ieatpizza
<p>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 <a href="https://medium.com/coinmonks/bitcoin-has-no-intrinsic-value-and-thats-great-e6994adbfe0f" rel="nofollow noreferrer">absence of intrinsic value</a> 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.</p>
<p>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.</p>
<blockquote>
<p>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</p>
</blockquote>
<p>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.</p>
<p>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 <a href="https://twitter.com/real_vijay/status/1325961588633841664" rel="nofollow noreferrer">description</a> 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 <a href="https://twitter.com/classicmacro/status/1327381449000034307" rel="nofollow noreferrer">price prediction</a>.</p>

CC BY-SA 4.0
2021-01-25T16:17:39.710Z
I've updated the first paragraph to rephrase that passage.
Murch
CC BY-SA 4.0
2021-01-25T16:26:40.340Z
@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
CC BY-SA 4.0
2021-01-25T13:55:15.630Z
2021-02-01T15:04:05.713Z
2021-02-01T15:04:05.713Z
Murch
<p>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?</p>

CC BY-SA 4.0
2021-01-25T06:40:13.460Z
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
CC BY-SA 4.0
2021-01-25T11:45:43.907Z
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
CC BY-SA 4.0
2021-01-25T18:59:39.053Z
@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
<value>
Is there some way to estimate the proper value of one Bitcoin?
nonopolarity
# Is there some way to estimate the proper value of one Bitcoin?

(Asked by: username_0 on 2021-01-25)

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?

**Tags:** value

> **Comments:**
> **username_1**: 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?  
> **username_0**: 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?  
> **username_1**: @username_0 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?  

---

## 2 answers

### Answer by username_2 on 2021-01-25. Score: 2

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".

> **Comments:**
> **username_2**: @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?  
> **username_0**: I think you can say Bitcoin has no inherit value... but think of people having some "tokens" which they can exchange for some goods (like seashell long time ago)... if each person has 100 tokens and they commonly exchange it for a pizza, that establishes its commonly perceived value. But if each person only has 3... then maybe they rarely use it, and treasure it, and so it can be worth a bicycle or something. Also think about if each person only has 3 tokens, and it is among the very rich people, then it probably is worth a lot more  
> **username_2**: @username_0 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.  
> **username_0**: @username_2 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  
> **username_2**: @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.  
> **username_2**: @username_0 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.  
> **username_0**: @username_2 See, that's why I said there seems to be a way to estimate a proper value. You just said if 1 person owns all tokens and even if it is a billionaire, it is worthless, what did you do? Didn't you just give the token a "proper value"?  
> **username_2**: @username_0 No. The key part is *"tokens that nobody was willing to pay anything for"*.  Anyways I'm also getting bored of this discussion since I feel like I'm just repeating myself now.  
> **username_3**: @username_2 You could at least burn dollar bills to keep warm or melt coins down to their useful elemental metals, so physical currency would still have minimal value even if no one wanted to trade. If no one wants to buy your Bitcoin, however, I can't think of a single useful thing you could do with it, meaning its value truly is zero.  

---

### Answer by username_4 on 2021-01-25. Score: 2

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](https://medium.com/coinmonks/bitcoin-has-no-intrinsic-value-and-thats-great-e6994adbfe0f) 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](https://twitter.com/real_vijay/status/1325961588633841664) 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](https://twitter.com/classicmacro/status/1327381449000034307).

> **Comments:**
> **username_4**: I've updated the first paragraph to rephrase that passage.  
> **username_2**: @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.  

---

