Research From ETH Zurich Suggests Bitcoin Is Overvalued

James McQuillan

ETH Zurich Bitcoin Research

The bitcoin market has seen a meteoric rise since its humble beginnings in 2009. But it currently trades in choppy waters with its high watermark peaks in late 2017 to its current throes. It is currently bouncing around $7,000 and it remains caught in a down trend. Research from ETH Zurich suggests it has further to fall before it is at a 'fair valueation'.

Its value has recently been thrown into further question by a mixture of companies taking varied strategies to analyse cryptos. A recent study by ETH Zurich, looks at the trending valuation of Bitcoin and expectations of investors around its peaks and troughs to suggest a fair valueation.

Bitcoin Powered By Popularity

Bitcoin's power truly does come from its popularity according to the study. It highlights a correlation between its foundation and upper values relative to investor participation. 

As participation increased since 2009, Bitcoin value crept upwards, to the most recent 2016-2017 rally. These studies have been capable of estimating the prices expected within rises and falls in its market price and investor participation.

"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."

'Are Bitcoin Bubbles Predictable?'

Metcalfe's law refers to the measure of value of a particular network. It's been shown to act as a measure of assessing when to buy in. According to Metcalfe's law, the research estimates that the market capitalisation is expected to fall by over $41 billion, reaching a total value of $77 billion by the close of 2018.

ICOs are also thought to be a major force behind the over valuation of the crypto markets and in part Bitcoin. According to CNBC the likely poor performance of ICO's in the long term will likely drag down Bitcoins value.