The massive surge in the price of Bitcoin from $900 to nearly $20,000 last year was like the spread of an infectious disease, says an economist.
The 900% increase in Bitcoin value was driven by buyers clamouring for a stake in the digital currency buoyed by the euphoria surrounding the event.
Economists at Barclays Banksay the rise and fall of Bitcoin closely followed the model of the spread of an infectious disease.
They say the message spread from person to person, with many scared they would miss out on the huge profits they saw others making.
The report says the susceptible population likely to catch Bitcoin fever has now fallen, which means the cryptocurrency is unlikely to see such a huge price rise again.
“This occurs with infectious diseases when the immunity threshold is reached; for example, the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections,” the economists said.
As a result, the economist team at Barclays believe that digital currencies have run their course and are unlikely to rise much above a market capitalisation of $780 billion – a level like that reached earlier this year.
“Attempting to value cryptocurrencies is problematic for the world of traditional finance, as they come as a new form of asset with no intrinsic value promised by cash flow. That means their value is solely determined by what people are willing to pay for owning them,” says the report.
Barclays describes demand for bitcoin generally from speculative buyers since about 2015.
The bank said speculative bet making was probably at or near the end of a cycle, due to enough potential new buyers becoming more alive to the risks of investing in cryptocurrency.
Rockefellers go into blockchain
The famously rich Rockefeller family is moving into cryptocurrency in a partnership with CoinFund in a venture to help entrepreneurs launch blockchain-based businesses.
The Rockefeller venture capital arm Venrockwill evaluate, mentor and invest in the new businesses.
Venrock has $2.6 billion under management.
“We wanted to partner with this team that has been making investments and actually helping to architect a number of different crypto economies and crypto token-based projects,” said Venrock partner David Pakman.