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Forecasting Bitcoin price using quantitative models, Part 4


An intellectual attempt to estimate Bitcoin’s price, corrected according to the hash rate metric.

This is Part Four of a multipart series that aims to answer the following question: What is the “fundamental value” of Bitcoin? Part One is about the value of scarcity, Part Two — the market moves in bubbles, Part Three — the rate of adoption, and Part Four — the hash rate and the estimated price of Bitcoin.

Hash rate and the estimated price of Bitcoin
In data mining, the term “hash rate” is a security metric. The greater the hashing power, the greater its safety and resistance to external attacks. It’s one thing for a hacker to attack your home computer, but it’s another when a hacker tries to attack tens of thousands of computers around the world at the same time.

The hash rate growth is due to the ever-increasing computing power of mining servers, which also means increasing costs to mine Bitcoin (BTC). A simple rule tells us that a given activity must have economic convenience in order for it to be sustainable over time. Those who extract oil from the ground must sell it at a cost greater than the cost of extraction, those who produce electricity must sell it at a cost greater than the cost of production.

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