Bitcoin is Still Overvalued but Investors are Bullish, Recent Studies Show
Main page Analytics, Altcoins, Bitcoin, Cryptocurrency
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April 3, 2018
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Bitcoin’s (Bitcoin) market value by the end of the year should be no more than $77 billion, professors at ETH Zurich Spencer Wheatley and Didier Sornette claimed in a recent research. That’s $41 billion less than cryptocurrency’s market capitalization as of Monday 2 April.

A surge of interest in the cryptocurrency helped Bitcoin skyrocket to a record high above $19000 mid-December 2017. However, already this year the digital currency has lost more than half of its value. It raised the issue of how much the digital currency is really worth even among the academia.

Answering this question, the Swiss researchers applied Metcalfe’s law. The latter claims that the value of a network is proportional to the square of its users. By applying this principle, professors at ETH Zurich calculated that Bitcoin’s market value by the end of 2017 should be $77 billion maximum. Bitcoin’s market capitalization Monday is $118 billion which is almost 35% more than their estimate.

Bitcoin is Still Overvalued but Investors are Bullish, Recent Studies Show
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Thus, the researchers made the conclusion that the currency is overvalued: “Looking forward, our analysis identifies a substantial but not unprecedented overvaluation in the price of Bitcoin, suggesting many months of volatile sideways Bitcoin prices ahead.”

In their research they also analyzed the past data by applying a mathematical model for evaluating speculative bubbles called “Log-Periodic Power Law Singularity”.

It helped them reveal four distinct Bitcoin bubbles – in 2011, 2012, 2013 and the most recent one in 2017. Those events “were followed by crashes or strong corrections.” In future this approach could be used to spot potential crashes.

Last year Bitcoin grew in price more than 13 times. But the cryptocurrency has lost more than half its value in the first months of 2018. This trend was parallel to the increased scrutiny from regulators in the US and key markets such as South Korea and Japan. Digital currency is traded on Monday near $7000. But Bitcoin proponents claim that cryptocurrency can recover as soon as there is clarity from regulators.

Nevertheless, another recently published research shows that cryptocurrency investors are still bullish. A Cryptocurrency Sentiment Index-Survey by Huobi Research was taken from 1,797 people stemming from 23 different countries in various regions worldwide.

The sentiment index measured positivity and negativity in score ranges between 0 to 100 while a 50 point mean indicates the market cap remains unchanged. Questionnaires were distributed over the internet and respondent identities cannot be confirmed.

Huobi’s report details that 77.9% of voters believe cryptocurrencies will rise by more than 30% in the next three years. Even in the short term more than half of those polled believe that the total market value of cryptocurrencies will increase in the next month.

Bitcoin is Still Overvalued but Investors are Bullish, Recent Studies Show
Huobi Academy of Blockchain Application

Most investors are more bullish towards the medium-term market in regard to the cryptocurrency economy. Around 77.6% of the participants believe that the total market value of cryptocurrency will see gains in the next three months.

“51.1% of the voters were confident in the market and believed that the market value of cryptocurrency would increase by more than 30% in the next three months,” Huobi’s paper reads. The long-term analysis reveals similar findings.

By Emiliya Dieniezhna

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