Will Bitcoin’s Price Continue to Drop?

Researchers from ETH University in Zurich, Switzerland believe that Bitcoin’s price is due for a very considerable drop by the end of this year.

According to their Metcalfe’s law and Log-Periodic Power Law Singularity (LPPLS) analysis we can expect to see another $44 billion wiped off Bitcoin’s market cap before the end of 2018.

This would result in a loss of another 35% of Bitcoin’s valuation, relative to current prices. If we add this on top of the over 70% of Bitcoin’s market cap loss since the all time high from December of last year, we end up with a market cap of just $77 billion and the price of Bitcoin of around $4,500.

The predictions are based on the study titled Are Bitcoin Bubbles Predictable? Combining a Generalized Metcalfe’s Law and the LPPLS Model by Spencer Wheatley, Didier Sornette, et al, of ETH Zurich’s Department of Management, Technology and Economics, and Swiss Finance Institute at the University of Geneva, Switzerland.

“We develop a strong diagnostic,” Mr. Wheatley explained, “for bubbles and crashes in bitcoin, by analyzing the coincidence (and its absence) of fundamental and technical indicators. Using a generalized Metcalfe’s law based on network properties, a fundamental value is quantified and shown to be heavily exceeded, on at least four occasions, by bubbles that grow and burst.”

Metcalfe’s law, also known as the network effect, postulates that the growth of a telecommunications network is proportional to the square of the number of connected users. Mr. Wheatley believes that because the number of bitcoin users is declining, so is the Bitcoin’s price and expects this trend to continue until the end of the year.

The study also proposes other possible end year market caps, such as $39 and $64 billion USD, which are even more pessimistic. They see the current market conditions as similar to those of early 2014, which resulted in a long and protracted bear market.

Bitcoins obituary has been written many times in the past and we must remember that the current price drop is only 3 months old. When we look at it through this lens it doesn’t look nearly as bad.

If you got into this game late last year to get rich quickly, you will most likely be disappointed, but if you hang around for the long term, it’s hard to see you loose. Just don’t sell your house to buy crypto OK?