Quote from: neoneros on March 04, 2015, 02:32:43 PM

Quote from: ebliever on March 04, 2015, 02:23:24 PM

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

It is backwards to think that miner's costs determine the value of bitcoin. Miners can only move the price by selling (or choosing not to sell) the coins they mine. If miners were to completely stop selling, there are enough coins being traded that it wouldn't affect the price that much, at least in the short term.

The cause-effect relationship is indeed the other way around: the difficulty follows the market price. If the price drops too much, it is no longer economical for some miners to continue operating, and the hash rate drops.

If we take miners out of the equation, the "fair" dollar price should be determined by the amount of trade that uses bitcoins, the money velocity of bitcoins, and the number of bitcoins in existence. So if there are 15M BTC out there, and the transactions performed using BTC add up to $15B/year and each bitcoin changes hands 10 times a year, then the fair price is 15B/15M/10 = $100.

Note that both the trade volume and money velocity are just random guesses here.