Rise In The Value Of Bitcoin Is Similar To Spread Of Virus – Barclays’ Analysts

Barclays’ Analysts Likens Bitcoin to Infectious Disease

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New York: Barclays’ Analysts led by Joseph Abate saw a number of similarities between Bitcoin and infectious diseases to develop a pricing model for Bitcoin taking cues from the world of epidemiology. The analyst stated their diagnosis as “Bitcoin has probably peaked”.

The model set up by the analysts divides a group of potential Bitcoin investors into three groups, which are the susceptible, the infected and the immune. The model assumes that as the value of bitcoin rises, “infections” which are spread by word-of-mouth (everyone wouldn’t want to miss out when their friends and colleagues are making wealth). The analysts at Barclays PLC in New York described the rest in a note to customers on Tuesday:

“As more of the population become asset holders, the share of the population available to become new buyers — the potential ‘host’ population — falls, while the share of the population that are potential sellers (‘recoveries’) increases. Eventually, this leads to a plateauing of prices, and progressively, as random shocks to the larger supply population push up the ratio of sellers to buyers, prices begin to fall. That induces speculative selling pressure as price declines are projected forward exponentially.”

The analysts added that an analogous pattern plays out to a virus when the so-called immunity threshold is reached:

“the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections.”

The analysts said that the major variables that determine when the gains in Bitcoin’s price turn into fall in price are the portion of the population that are aware of Bitcoin (survey revealed that awareness is nearly universal in the developed economies) and the portion that are willing to invest – the susceptible group (survey revealed that the susceptible group is small).

The model revealed that though Bitcoin rose back from its fall in 2011 and 2013, the high level of awareness this time around indicates that the cryptocurrency may never return to its all-time high of about $20,000 last Dec. Bitcoin is presently trading at about $6,800.

The analysts said:

“We believe the speculative froth phase of cryptocurrency investment — and perhaps peak prices — may have passed.”


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