What is the fair value of a currency?

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pablomp

pablomp

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Hello dashers :)

I've been able to finish and publish the article that explains the Currencies Fair Value rational model I've been working on for so long. I've also dedicated a specific section to Dash in it. I hope you enjoy it. You may also download it in PDF format, the link is at the end of the article:

https://steemit.com/bitcoin/@pablomp/cryptocurrencies-what-is-the-fair-value-of-a-currency

This model can address questions such as how much the value of Dash will increase if some units are never created by the treasury. It can also be used to assess the impact in value of an improvement or a marketing campaign.

Please, feel free to ask me any questions you may have. I think that it is very interesting for the Dash community.
 
Hi Pablo, great work here! I have a question regarding the long term value of Dash: If the amount of maximum Dash available in the future is capped and no more coins will be ever made. In the long run we will see a decrease of the supply due to people losing their coins (damaged hard drives, stolen phones, people dying, etc) Is Dash destined to dissapear unless a perpetual addition to supply is implemented?
 
bitcow said:
Hi Pablo, great work here! I have a question regarding the long term value of Dash: If the amount of maximum Dash available in the future is capped and no more coins will be ever made. In the long run we will see a decrease of the supply due to people losing their coins (damaged hard drives, stolen phones, people dying, etc) Is Dash destined to dissapear unless a perpetual addition to supply is implemented?
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Hello @bitcow,

No, it isn't, because the minimum Dash unit can always be redefined to be lower. Currently it is 0.00000001. Money can always be divided and it doesn't loose its money condition after division. Apples, for instance, don't hold this property, so they are doomed to disappear if they are not constantly created. As opposing, gold (if we forget about nuclear reactions), holds this property.

Hope this clarifies your concerns!
 
Thanks for the quick reply! I'm not sure I get it. If Dash can be eternally divided in ever smaller fractions. What's the point of capping the amount of Dash in the first place? Seems to me like perpetual division is no diferent of perpetual emission. The key here is con control the purchasing power of Dash by managing the supply as a function of demand. Money is ultimately a token for trust, if we want Dash to gain main stream trust this needs to be answered for the long run. But I'm new to Dash, perhaps it has already been answered?
 
That's a fine piece of economology! ;) Tbh, I can't say I went through it thoroughly (an awful lot of big sums!), would you say it's suitable for finding a pivotal point across all markets? ie. the anchor everything else can firmly attached to, like the dollar in todays markets or gold in the past.
 
bitcow said:
Thanks for the quick reply! I'm not sure I get it. If Dash can be eternally divided in ever smaller fractions. What's the point of capping the amount of Dash in the first place? Seems to me like perpetual division is no diferent of perpetual emission. The key here is con control the purchasing power of Dash by managing the supply as a function of demand. Money is ultimately a token for trust, if we want Dash to gain main stream trust this needs to be answered for the long run. But I'm new to Dash, perhaps it has already been answered?
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Hello @bitcow,

Sorry for the late answer. "Perpetual division" is indeed absolutely different from "perpetual emission". If for instance, the currency today were used ten times more than yesterday, to buy the same asset you'd just need one tenth of what you needed yesterday. Decimal places per se don't change the purchasing power of the currency holder, they just allow for smaller transactions. On the other hand, increasing the supply does reduce the purchasing power of the currency holder. If you hold one unit and the supply is increased, you'll still hold one unit and you'll loose.

Dividing units is just a change of unit, just a reference. Printing money is not a change of units, it is a real increase of the number of "coins" available.
 
stan.distortion said:
That's a fine piece of economology! ;) Tbh, I can't say I went through it thoroughly (an awful lot of big sums!), would you say it's suitable for finding a pivotal point across all markets? ie. the anchor everything else can firmly attached to, like the dollar in todays markets or gold in the past.
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Hello @stan.distortion,

Exactly. Like the stocks in the stock market. They have an anchor, a fair value based on the company's free cash flows. That's why they don't move too far from it. People can calculate different fair values if they use different estimations on cash flows, and that is the range stocks move within. Fair value acts like an anchor.

With currencies it is similar, but not equal. In a very speculative environment (most of the trades being speculative), the fair value is the anchor, but people has to know how to calculate it (like everyone knows how to calculate price to earnings in stocks). Paying something very far from the fair value for a currency is absurd, for they will loose when the normal trades (non speculative) dominate. The thing is, in the end, when the currency is mostly used as a currency and not as a speculative instrument, its value will be very very close to its fair value. And this is almost exact with currencies as opposing to stocks. For when a currency is used as a currency, future transactions are easier to predict than future cash flows.

I hope I've clarified it somehow...
 
Hi @sanjanasingh17 ,

The thread topic wasn't meant to be an open question. It is the title of the paper that explains it. You have it in the first post. I hope you find it useful ;)
 
bitcow said:
Hi Pablo, great work here! I have a question regarding the long term value of Dash: If the amount of maximum Dash available in the future is capped and no more coins will be ever made. In the long run we will see a decrease of the supply due to people losing their coins (damaged hard drives, stolen phones, people dying, etc) Is Dash destined to dissapear unless a perpetual addition to supply is implemented?
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Because Dash is so divisible, in theory, 90% of the Dash could be lost, and we could still run a significant portion of the world economy on the reemaining 10%. The more valuable it gets, the more careful people will become with it. And the software and user interface will make it more difficult to lose Dash. Sure, some people will die and their Dash will become unavailable, just like cash buried in the back yard.

Also in theory, we could increase divisibility to the point where the world economy could run on one Dash.

And finally, in theory, we could change the protocol to emit a tiny amount of Dash to make up for lost or destroyed Dash based on a fair algorithm that causes neither deflation nor inflation.
 
pablomp said:
Hello dashers :)

I've been able to finish and publish the article that explains the Currencies Fair Value rational model I've been working on for so long. I've also dedicated a specific section to Dash in it. I hope you enjoy it. You may also download it in PDF format, the link is at the end of the article:



This model can address questions such as how much the value of Dash will increase if some units are never created by the treasury. It can also be used to assess the impact in value of an improvement or a marketing campaign.

Please, feel free to ask me any questions you may have. I think that it is very interesting for the Dash community.
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generally, market should set the price
 
FirstCryptoETF said:
generally, market should set the price
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An efficient market is well informed. This interesting formula helps educate the market and may prevent some irrational exuberance and other better outcomes.

It is not unlike analyzing a stock or other investment by looking at the price to earnings ratio and other metrics to decide what's a good deal, what's overpriced and what's neither.
 
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https://steemit.com/bitcoin/@pablomp/cryptocurrencies-what-is-the-fair-value-of-a-currency
pablomp said:
The fact that I was able to arrive to a model that successfully predicts the price of a currency without using information from the markets is not magical. For as I stated at the beginning, currencies do not have an intrinsic fair value.
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What an extraodinary claim!
Did you also managed to predict the crypto market crash, from Dec 2017 until now?

Because I did it, without using any math! :D

demo said:
Spies are spreading FUD , claiming that millions of spam proposals will occur in case the governance questions will become cheap. Spies have been instructed by their employers to destroy the DASH governance system, at all costs. And the easiest way to destroy the governance system of DASH is to make the governance questions too expensive. This is one of the reasons why DASH's dollar price increases. The employers of the spies tremble with fear when they realize that a cryptocoin will occur that will have effective governance, so they want to control it and intercept it, so they buy in order to gain voting rights and vote against whatever proposal is towards the effective governance goal.
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#13
 
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@demo It tells you the present price, not the future price ;) What is interesting is it does not use any market data at all for arriving to the present price.
 
pablomp said:
@demo It tells you the present price, not the future price ;) What is interesting is it does not use any market data at all for arriving to the present price.
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Could you give us the results of your math model, by using the recent data that occured after the cryptocurrency market crash?
 
Yes, of course @demo. This is an updated chart of the fair value of Dash:

dash_fair_value_btc.png

As you can see, there has been a lot of negative speculation since the crash. When the speculative transactions are not biased on average, price tends to fair value. Before 2016, when everyone was saying "altcoins shitcoins", Dash was undervalued. After this crash something similar is happening again. In other words, the current usage of Dash implies a higher price if the speculative bias is removed. Right now people are betting against the future of Dash basically.
 
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