If the sums got by ETH Zurich researchers are right, by year’s end bitcoin’s cost should get a decrease by as much as $44 billion, some 35% below its current $121 billion (as of this writing). The recent study "Are Bitcoin Bubbles Predictable?" in join with 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, respectively, is endeavoring to make a prediction.
We develop a strong diagnostic 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.
Spencer Wheatley, Professor of Business Risks, ETH Zurich’s Department of Management, Technology and Economics.
Nowadays it is known as the network effect. Mr. Wheatley guesses the number of bitcoin users is declining. The authors of the study confess the appropriate problems in determining the numbers of users. Most enthusiasts have multiple wallet address, and so counting them seems like a deadlock. But if it’s true price declines shed users, it’s likely just as true price increases bring more users. Instead, researchers use market capitalization as a better evaluation for user growth or contraction.
According to the published report, the predicted values for the market cap discover a present over-estimation of at least four times. The Metcalfe support line offer current values around 44, 22, and 33 billion USD, in contrast to the actual current market cap of 170 billion USD. Further, constant user growth in line with the decline of active users starting in 2012, the end of 2018 Metcalfe forecastings for the market cap are 77, 39, and 64 billion USD respectively, which is still less than half of the present market cap. These results are found to be reliable towards to the chosen fitting window.
So, the current market looks similar to that of early 2014, which was accompanied by a year of sideways and downward dynamics. Some separate fundamental development would need to exist to justify such high valuation, which the scientists are uninformed of.