Is Bitcoin bubble regular? Experts have come up with inspection methods

Huitong.com – Since the 2008 issue of Bitcoin, Nakamoto has significantly increased its price and has become an emerging asset class. By the end of 2017, its price reached a peak of nearly $20,000, but it has fallen Up to about $8,500. The discussion about whether the Bitcoin bubble is predictable has also intensified.

Since the 2008 issue of Bitcoin by Satoshi Nakamoto, its price has increased significantly and cryptocurrency has become an emerging asset class. By the end of 2017, the price of Bitcoin has reached a peak of nearly $20,000, but It has now fallen to around $8,500. The explosive growth and volatility of Bitcoin has made the debate about the intrinsic value or basic value of Bitcoin increasingly intensifying.

Bitcoin will rise to 10 million U.S. dollars/piece in the future?

Although many people claim that Bitcoin is a scam, its value will eventually be reduced to zero, but some people have compared the market value of cryptocurrency with the market value of gold. By comparing Bitcoin with gold, some market analysts predict that The price of Bitcoin will be as high as US$10 million in the future. Given the bitterness of Bitcoin, which many investors have experienced, many people want to know how it will develop next.

Nowadays, there is a new literature review on the study of cryptocurrency. Through the Bitcoin workload proof mechanism, it can be found that the more nodes there are, the more valuable it is. In the 1980s, Metcalfe proposed that The value of the network is equal to the square of the number of nodes in the network. If Metcalfe's law is followed, indicators such as P/E, P/B, and share price to cash flow ratio may indicate that Bitcoin is a big bubble. .

Is bitcoin a bubble?

Here, the experts developed a detection method for whether or not Bitcoin is a bubble. This method, which combines Metcalf's law, will provide a basic value for Bitcoin and log-periodic power law (LPPLS) models. This method to detect Bitcoin is a bubble.

The basic value of Bitcoin

Metcalf's law states that, in some cases, the value of the network is proportional to the number of users on the network. To visualize this, it can be seen from Figure 1 that the linear relationship with the slope 2 is consistent with Metcalf's law.

(Figure 1) However, as shown in Figure 2, it is more interesting to directly compare the market cap predicted by Metcalf's Law with the real market cap. Experts have indicated the blue and orange dashed lines as basic support. The coarse red and green lines, the parameters given by the regression in Figure 1, fall between the basic level and the bubble level.

Figure 2: According to the behavior of different active users, the upper limit of the market value of Bitcoin is compared with the upper limit of the forecast. The current market situation is similar to the market situation at the beginning of 2014.

It is well known that even though Bitcoin has hit new highs from time to time, Bitcoin is a legend that the bubble and Bitcoin are about to collapse. It has also caused investors to become uneasy. In Figures 3 and 4, people can It has been found that in less than six months, Bitcoin is a bubble that has increased 20 times more than before. After studies have shown that the burst of the Bitcoin bubble is attributed to the occurrence of fundamental events. For example, in 2011 In the same year, Mt.Gox, a Japanese-based cryptocurrency exchange, was attacked by hackers, causing the price of cryptocurrency to drop by 88%. At the end of 2017, South Korean regulators threatened to close the local cryptocurrency exchange. This triggered Bitcoin prices have fallen sharply. There have been rumors that Bitcoin will destroy Bitcoin itself.

Figure 3: The upper triangle represents the market value of Bitcoin. Use bright colored lines to draw people's attention, number them, and add dates. The lower triangle shows that the four bubbles have the same height and length and have the same Color coded, and there is a pure hyperbolic power law and LPPL model.

Interestingly, although the height and length of these bubbles are very different, when they reach the same logarithm, people will find that the superexponential growth is obvious. From this perspective, it is like sand. Like heaps, bitcoin collapses once the expanding Bitcoin bubble becomes large enough. FX678 reports that, in other words, the main cause of bitcoin collapse is the instability of the bitcoin system itself.

The financial bubble is characterized as an unpredictable phenomenon, because the stock price is often assumed to obey the random walk. With the increase of speculative enthusiasm, the market is close to the critical point, driven by the herd effect, and any minor disturbances are May trigger a bitcoin crash.

As shown in Figure 4, the paper proves that the model provides useful early warning information for the 2017 correction, and generates a confidence interval after the test.

Figure 4

In summary, Metcalk's law provides the basic value based on the characteristics of the network. Using log-periodic power-law (LPPL) models, one can predict whether there is a bubble in the Bitcoin market.