It is a disappointing Monday for bitcoin owners, with the leading cryptocurrency having lost about 15% of its value over the last week. Economists are busy trying to create models that will forecast the future of bitcoin’s price and according to work done by economics Professor at Columbia University, Panos Mourdoukoutas, there are two models producing opposing outcomes.
The Bull model
The Adam Hayes model is based on scarcity and claims bitcoin will reach $55,931.60 by 2020. Oh let’s call it $56,000. This is based on the bitcoin supply, because mining is expected to slow down as we get closer to bitcoin’s 21 million-coin cap. There are only around four million bitcoin’s left to mine and unless “there is some unexpected and abnormal change in hash rate” says Bitcoinist, “the reward rate for successful miners will drop from 12.5 to 6.25 per block in 2020.”
The Bear model
Spencer Wheatley, a Zurich-based professor bases his forecast of a bear market for bitcoin on Metcalfe’s Law. This has been used to explain rapid growth of the Internet amongst other things. Metcalfe’s Law is expressed in two general ways:
1) The number of possible cross-connections in a network grow as the square of the number of computers in the network increases.
2) The community value of a network grows as the square of the number of its users increase.
Wheatley believes the total market capitalisation of bitcoin will contract to $41 billion from its present $120 billion. He also predicts serious volatility. He said: “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.”
Volatility: good for some, bad for others
But here’s the interesting bit, while Wheatley sees volatility as a negative, BitMEX co-founder Arthur Hayes (not to be confused with Adam) says the opposite: “You want as much volatility as possible to have as much chance that Bitcoin goes to $50,000, $100,000, $1,000,000, whatever that high number is.”
Where do you think bitcoin is going to go and where will it be in 2020? Let us know your thoughts?