Barclays Plc analyst has found enough similarities between bitcoin and infectious diseases in order to build a valuation model for the asset, originating from the world of epidemiology. This is reported by Bloomberg.
The analyst broke the pool of potential bitcoins-investors into 3 groups: susceptible, infected and unreceptive. He argues that when the price rises, the infection spreads.
As more of the population become asset holders, the share of the population available to become new buyers -- the potential ‘host’ population -- falls, while the share of the population that are potential sellers (‘recoveries’) increases. Eventually, this leads to a plateauing of prices, and progressively, as random shocks to the larger supply population push up the ratio of sellers to buyers, prices begin to fall. That induces speculative selling pressure as price declines are projected forward exponentially.
A similar dynamics is observed in the spread of infectious diseases, when the epidemic reaches the so-called threshold of immunity - "the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections" the analyst writes.
The main variable that determines when the BTC price is replaced by a fall is the share of the population who is aware of bitcoin and who wants to invest (susceptible population), Barclays says. Studies show that in developed economies, everyone knows about bitcoin, and the share of the susceptible population is small, the analyst writes.
Analyst team believes that the speculative froth phase of cryptocurrency investment -- and perhaps peak prices -- may have passed.