Bitcoin Is Overvalued: Swiss Study
According to Swiss researchers, the leading cryptocurrency Bitcoin is overvalued and its market value should plunge before year-end.
A study conducted by ETH Zurich showed that the values for the market cap indicate a current over-valuation of at least four times.
The reserchers pointed, that once Bitcoin is valued, it remains to see when it will be overvalued, which means that market crash is imminent.
According to the study, the growth of new active bitcoin users is slowing. As per the Metcalfe’s law, the movement shows that the cryptocurrency’s market capitalization will not grow as quickly as it has.
The researchers diagnosed four distinct bitcoin bubbles that correspond to Log-Periodic Power Law Singularity model, a mathematical model for evaluating speculative bubbles. These were followed by crashes or strong corrections: one each in 2011, 2012 and 2013 plus the most recent at the end of 2017.
Last year Bitcoin’s price multiplied more than 13 times. By the end of 2017, the price of the asset peaked at almost $20,000 with total market cap of $800 billion. After that, the price fell 50% in 2018.
Currently, bitcoin is valued at $6,800 with a market cap of $115 billion.
The paper said, “We emphasize that one should not focus on the instantaneous and rather unpredictable trigger itself, but monitor the increasingly unstable state of the bubbly market, and prepare for a correction.”