From January 2017 to this day, bitcoin price has increased more than 1000%. While debates over the criptocurrency are focused on its short term utility and its disconnection with real financial activities, factors influencing bitcoins price remains unknown (to me at least!). Thus I would like to have some insights about how bitcoins is actually priced and how can wrong assessments of its fair value can be identified in order to be corrected.
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2 Answers
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Bitcoin is now priced by the law of supply and demand, as it is a product that is liquid enough. I stressed the "now" because at its issuance, price was arbitrarily fixed. Thus there are no "wrong" assessments on its fair value.
What drives its price ? Mainly speculation for now.
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Similar to "normal" Stocks you dont price them from a Quant perspective the fair value is the current Market Value. Pricing an Option on Bitcoin could be done similar to commodities (high volatility and heavy tail distribution.
An other way to look at Bitcoin is from a quantitative trading perspective and time series analysis but that has nothing to do with pricing.
