How are BitClout Prices Determined? (Explained for Beginners)
Chances are, you're reading this post because you want to better understand how the BitClout cryptocurrency is priced, and how different factors can lead to an increase or decrease in its value.
Well, you've come to the right place.
In this post, I'll explain the inner workings of BitClout pricing, and how Bitcoin currency fluctuations can affect the value of BitClout when measured in US Dollars.
I'll also go over the economics of BitClout, how BitClout prices increase or decrease, and why it sells for a substantial discount on secondary exchange markets (compared to its official price).
Then, at the end of this post I'll briefly discuss the pricing of creator coins as well.
Even if you don't know anything about BitClout, or cryptocurrency, or blockchain, don't worry: I'll explain everything in detail so that even a complete beginner can understand everything.
Table of Contents
Important Concepts to Understand
The Difference Between Creator Coins and BitClout Coins
BitClout Prices are directly pegged to Bitcoin
“Official” BitClout.com Prices are Different than Secondary Market Prices
Factors that Affect BitClout Price (How are BitClout Prices Determined?)
Outstanding Supply of BitClout
Currency Used to Price BitClout
BitClout Prices on Secondary Markets
How are Creator Coins Priced?
Important Concepts to Understand
To get started, I’d like to explain some key concepts and ideas that are needed to understand how the pricing of BitClout works.
1. The Difference Between Creator Coins and BitClout Coins
First, it’s important to recognize that BitClout.com has both BitClout coins and Creator coins, which are two distinctly different things.
Creator coins are tokens that represent the value of a user on the platform. For example, you can buy @HughJiang creator coins which are meant to represent the value that I bring to the world, whether that’s through the articles I write on the BitSwap blog, or through anything else I do.
Here's a picture of a screen that shows a few creator coins which you can buy and sell.
BitClout coins, on the other hand, are used to buy creator coins and perform basic actions like posting, liking other posts, etc. In other words, BitClout coins ($BTCLT) are like the main currency for the BitClout platform.
Note: the term “BitClout” is used to refer to both BitClout coins (the cryptocurrency), and the BitClout.com platform — so you’ll have to use the context of the situation to determine which meaning it refers to. I’d also like to point out that the symbols “BTCLT” and “$BTCLT” are both used to refer to the BitClout coin (the cryptocurrency).
When you first join BitClout and verify your phone number or email address, you will be given a small amount of BitClout for free that will allow you to perform basic activities on the platform such as making a profile, posting, liking posts, “reclouting” posts (similar to retweeting), etc. The free BTCLT that you receive will be more than enough to get you started using the platform.
However, if you want to invest in other people’s creator coins or hold more BitClout cryptocurrency, then you’ll have to buy more BitClout by depositing Bitcoin into the platform. You can then buy BitClout using the Bitcoin you deposited.
If you do not verify either your phone number or email address on your BitClout account, then you will not be sent any free BitClout (so in this case, to get started with the platform you’ll have to buy BitClout yourself using Bitcoin).
In this post, I will discuss the pricing of both creator coins and BitClout coins. The key takeaway here is to just understand there is a difference between the two.
2. BitClout Prices are Directly Pegged to Bitcoin
Another key idea to understand is that BitClout is priced with respect to Bitcoin.
Thus, to get US Dollar prices, the price of BitClout in Bitcoin (BTC) is automatically converted to a US dollar price based on a USD/BTC exchange rate. This converted US Dollar price is what's displayed on BitClout.com.
However, since BitClout is directly pegged to Bitcoin and not US dollars, if there are any fluctuations in the BTC/USD exchange rate, then the price of BitClout will also change.
Don’t worry if you’re still a little bit confused — I’ll explain this concept in more detail later on when I talk about the factors affecting BitClout prices.
For now, just understand that BitClout is directly priced in terms of Bitcoin, not US Dollars.
3. Official BitClout.com Prices are different than Secondary Market Prices
Whenever I say the official price of BitClout, I am referring to the price of BitClout listed on BitClout.com. These are the prices you’d have to pay for BTCLT if you buy it directly from BitClout.com using Bitcoin.
However, on secondary exchange markets where people buy and sell BitClout with other users, prices are a lot lower than the official prices listed on BitClout.com.
Secondary market prices are a much better reflection of the market value of BitClout than the official prices listed on BitClout.com.
That’s because on BitClout.com, there is no free market for trading — you can buy BitClout, but right now you can’t directly sell it on the platform. On the other hand, these secondary markets facilitate a free market, where anyone is free to buy and sell at their own desired prices.
The reason for these pricing differences will make more sense later on in the post.
For now, let’s go over the factors affecting official BitClout prices:
Factors that Affect BitClout Prices (How are BitClout Prices Determined?)
There are two factors that affect BitClout’s official prices: the total outstanding supply of BitClout, and the exchange rate between Bitcoin and different currencies that are used to measure BitClout prices (mainly US Dollars).
1. Outstanding Supply of BitClout (Total Coins Minted)
BitClout prices (measured in terms of Bitcoin) are automatically determined depending on the total number of BitClout coins that have been minted. For every 1 million BitClout coins created, the official price of BitClout doubles.
In other words, for every 1 million BitClout coins minted, the Bitcoin to Bitclout exchange rate will double.
This doubling effect creates a phenomenon known as exponential growth, where as the supply of BitClout grows, prices increase faster and faster.
Here’s a table and graph I made to illustrate this phenomenon, with the assumption that the price of BitClout started at $0.01. (Technically the prices should be in Bitcoin, but I just used dollars because it’s easier for everyone to understand)
You can see that prices at first increase very slowly — by the 7th doubling in price at 7 million total BitClout mined, BitClout has only increased from one cent to a little over a dollar. However, add another 7 doublings in price, and by the 14th million total BitClout mined the price would have increased to a whopping $163.84.
If you’d like to play around with the numbers (i.e. starting price, starting coin supply, and coin supply increment), then you can visit this Google sheets file I created, where you can adjust the parameters and model prices for different situations.
After clicking on the link above, go to File > Make a copy to make your own copy of the Google sheet. Then, you can input values into the input table (in green) to set your own parameters. Everything (tables and graphs) will update by itself after entering new data.
Also, here’s a little bit of extra information that you might find interesting:
When BitClout first launched, 2 million coins were pre-minted and distributed to founders and investors. This contributed to the explosive growth of BitClout’s official prices during the early days of the platform. Now, however, new coins are mined only when users deposit Bitcoin into the platform and exchange it for BitClout, thereby increasing the total BitClout supply in circulation.
2. Currency Used to Price BitClout (and its Exchange Rate with BTC)
Another factor that can affect the price of BitClout is the currency that you use to measure its price.
For example, let’s say you use US Dollars to measure the price of BitClout (which is what most people do).
Now, for the purposes of this example let’s just say 1 BTCLT currently costs 0.01 Bitcoin. Since you know the price of BTCLT in Bitcoin, you can get the price in US Dollars using the exchange rate between Bitcoin and USD.
At the time of writing, 0.01 Bitcoin is worth about $500. But over time, the price of Bitcoin can fluctuate. Tomorrow, Bitcoin might decrease in value so that 0.01 BTC is worth $300 instead of $500.
Thus, even though 1 BitClout still costs 0.01 Bitcoin, it now only costs $300 to buy 1 BitClout because the price of Bitcoin decreased with respect to the US Dollar.
In a similar way, if the price of Bitcoin increased with respect to the US dollar, then the price of BitClout would also increase with respect to the US dollar, independent of any change in BitClout supply.
If you use a currency other than Bitcoin to measure the price of BitClout, then fluctuating exchange rates between Bitcoin and your currency of choice can change the price of BitClout, even if the outstanding BitClout supply remains constant.
This also explains how official BitClout prices can go down, even though already-mined BitClout can never be destroyed. It’s simply because we all measure BitClout prices in Dollars, so fluctuations in a Bitcoin/Dollar exchange rate therefore affects BitClout prices.
BitClout Prices on Secondary Markets
BitClout on secondary markets sells for less than its official listed price (because buyers need an incentive to buy from unofficial sources).
Over-the-counter BitClout trading group on Discord
In general, BitClout on the secondary market sells for about 60% of its official listed value on BitClout.com. In other words, it sells at about a 40% discount.
For example, at the time of writing, BitClout's website shows that 1 $BTCLT is worth US$150. Therefore, on the secondary market, prices will normally be 60% of $150, or $150*0.6 = $90 per $BTCLT.
Obviously the 60% rule isn’t an exact number: I’ve seen BitClout on secondary markets selling for as low as 50% or as high as 70% of its official listed price. But as far as I can see, BitClout on secondary markets normally sells for about 60% of its official price (or at a 40% discount).
How are Creator Coins Priced?
Creator coin prices are determined based on the total supply of the specific creator coin in circulation. Every time the supply of a creator coin doubles, the price will quadruple. So as more people buy a creator coin, its price grows exponentially. In the same way, if people start selling, creator coin prices decrease exponentially.
The following graph shows how the price of your creator coin grows depending on the total supply of your creator coin in circulation. The graph assumes that 1 BitClout is equal to $150 USD.
Or, you can use the official formula for pricing creator coins, as taken from the BitClout whitepaper:
Price in BitClout = 0.003 * creator_coins_in_circulation^2
Price in USD = 0.003 * creator_coins_in_circulation^2 * bitclout_price_in_usd
Note that creator coins prices are pegged directly to BitClout. This means that if the price of BitClout fluctuates with respect to the US Dollar, then creator coin prices will also change (if you measure their prices in US Dollars).
In other words, creator coin prices are affected by the total creator coin supply in circulation, and by BitClout prices. Then, BitClout prices themselves depend on the total supply of BitClout, and the exchange rate between BTC and USD.
If you’re confused, you can go back and read the part where I talked about the factors affecting BitClout prices.
Hopefully this post has helped you better understand how BitClout and creator coins are priced, and how different factors (such as supply and exchange rates) can affect their prices.
If you have any questions, feel free to find me in the BitSwap Discord group, or message me on BitClout @HughJiang. I’d be happy to help you out!