The current price of 1 BTC should be $2.50 USD

[contactdick]

The real value of a currency depends on the value of the goods that can be purchased with it. If we assume the majority of bitcoin transactions for 'real' goods (not currency speculation) are on silk road we can do the following calculation.

The demand in USD is about 1.9 million per month (http://arstechnica.com/tech-policy/2012/08/study-estimates-2-million-a-month-in-bitcoin-drug-sales/) which works out to be $63,333 per day (the demand)

There are currently 10118337 bit coins that have been created and each coin is spent on average once every 399.357 days (http://abe.bitcoinstats.org:2750/)

This means that each day there are 10118337 / 399 = 25,359 bitcoins available to use for transactions each day (the supply)

The price of 1 BTC should then be supply / demand = $63,333 / BTC 25,359 = $2.49 USD per coin

Does anyone have alternative suggestions for calculating the price?

[oortlieb]

The method you've used is similar to ones that FOREX traders use to value traditional currencies, which would speak to its validity. A market-basket of goods is defined, and a relative exchange rate for two currencies is based on the price differences of the two market-baskets.

A potential issue with this analysis is that your market-basket only contains illegal items -- however, even if your final valuation isn't accurate, it suggests to me that there are likely other cross-market pricing inconsistencies. I assume those are what you're interested in finding.

[contactdick]

Pretty much, I'm simply trying to understand what the fundamental value of the currency is. The reason i'm using illegal goods is that they are the only ones i can find whose exchange must be in bitcoing (yes there are some other smaller goods but nothing on that scale).

[noonespecial]

What someone else will pay me for one?

[contactdick]

that's the current market value yes, i'm trying to estimate the fundamental value

[dmm]

All value is subjective and relative. There is no "fundamental value".

[benaiah]

Precisely. The OP needs to read his Van Mises.