Hacker News Reader

Comment by stillbourne | Hacker News Reader

Or it could be, gasp, perhaps bitcoin was overvalued? No, anything but that.

How would you define "overvalued"? Is it the current average price compared to a very low price three months from now? What if it recovers a few weeks after that — would that change the fact that it was once "overvalued"? Valuation is not based on nothing, in vacuum. The challenge is to understand the underlying factors. The post you replied to actually tried to shed some light.

How would you define "overvalued"?

The difference between the price of bitcoin versus the price of bitcoin as it would be if it was only used as a medium of exchange rather than a speculative asset.

The price of energy required to mine 1 BTC. What else? That's its inherent value.

No, the energy required is a function of the price, not the other way around.

The bitcoin network adjusts the block difficulty (effectively the energy required to mine 1 BTC) every 2016 blocks such that the rate of creating blocks is fixed at one block (currently 12.5 BTC) every ten minutes.

If the dollar value of energy required to mine 1 BTC is significantly less than the current dollar value of a bitcoin then it is likely more hash power will be added to the network by the bitcoin farms, further increasing the network's hash rate, and as a consequence the block difficulty and therefore the price of the energy required to mine 1 BTC.

The price of energy required to mine a bitcoin follows the bitcoin price not the other way around.

This is just the discredited labor theory of value, applied to machines instead of humans.

In other words, I could spend an hour exerting effort and have nothing of value to show for it at the end?

That's obvious... You can work for a year and still get nothing... Because your work has no value in and of itself.

In general things are only as valuable as the "market" is willing to pay for them.

> That's obvious

Sure, I was agreeing / checking my understanding was correct :)

This will end very soon since 80% of coins have been mined already. So the energy consumption will only be miners processing transactions.

In my book, 2140 isn't "very soon" (based on the current Bitcoin mining algos).

The last 1% of unmined Bitcoin will last over 100 years. A majority of mining profits at that point will be from tx fees.

Sure, but "only" !== "majority".

I thought most people, even the hard-core believers, were waiting for a correction. The previous times Bitcoin grew so exponentially it was always followed with a hard crash, though this time it's taking a bit longer.

Not really. It took a long time to bottom out post-gox

Please do tell what the correct value is for a bitcoin and how you arrived at that number.

The value is 0 because entropy is a stupid commodity.

Yes theres that, but BTC being overvalued doesn't explain the entire market dip that we are seeing now. However, it is consistent with Bitcoin's historical pattern:

https://twitter.com/cryptozerp/status/953324474077769728

IMO BTC's value could sensibly fluctuate around $10k. The hype/trend and the media frenzy caused the spike of $20k.

Let it rest for a while and I believe it will have more races up-and-down the 10k-22k range so people can enjoy their gambling ;)

It could also sensibly fluctuate around $1000 or $100.

Reply on news.ycombinator.com