It is always fun to search and research all of the latest bitcoin price predictions the market and community has to offer. The latest, which is mind-bendingly awesome, comes from a highly respected academic. Here is what he had to say: Bitcoin is going to hit $50,000 in 2022 and in about a decade cross the $1 million per BTC mark, according to the parabolic trend Bitcoin has been following as per Crypto analyst, Cane Island Crypto.
Now, Timothy F. Peterson, the founder and investment manager of Cane Island Alternative Advisors explains why is this a real possibility in his paper titled, “Bitcoin Spreads Like a Virus.”
According to this paper, the long-term price of Bitcoin is not random rather is network economics that represents the growth rate in users that has a considerable effect on the BTC price by observing the data for both Facebook and Bitcoin.
The value of a currency depends upon its use and acceptance and in case of Bitcoin, as cited by Federal Reserve, it has two key properties viz. permissionless access and decentralized database management.
Moreover, “database management systems can have a fundamental value if they are tailored to meet the needs of a given constituency.”
So, the author says, unlike the common and misinformed belief of “value is a mystery” myth regarding Bitcoin, is countered on the above counts.
Actually, no modern currency, even the sovereign fiat currency have any intrinsic value along with commodity money that offers durability and scarcity that paper money doesn't have. He further shares the explanation provided by Federal Reserve Bank of St. Louis to state that the lack of fundamental value is not the same as having no value, rather normal and acceptable characteristic of commodity and fiat money.
“Gold, for example, trades above its value as measured by its industrial applications. The U.S. dollar trades above its fundamental value in discharging U.S. tax obligations. The premium some people are willing to pay for gold and the U.S. dollar reflects the value these objects possess as exchange media. The market value of these objects would decline, but not fall to zero, should this premium suddenly vanish.”
In the short term, the author says, noise is the dominant driver of price and volatility. And the market consuming and spreading the nose about bitcoin and crypto is “not noteworthy.”
However, over time, the price tends towards value. He further says, the model presented here is to suggest that the probability of extreme price crash or soar is “very small” as the number of users is driving the price.
By using Metcalfe's law that is a typical approach to crypto valuation, the price is a function of n users. However, it differs from other past modes in the way that over time, in might grow at a non-constant rate. Here is the abstract to the Bitcoin Spreads Like a Virus paper:
We illustrate, by way of example, that Bitcoin’s long-term price is non-random and can be modeled as a function of the logistic growth of number of users n over time. Using observed data for both Facebook and Bitcoin, we derive the relationships between price, number of users, and time, and show that the resulting market capitalizations likely follow a Gompertz sigmoid growth function. This function, historically used to describe the growth of biological organisms like bacteria, tumors, and viruses, likely has some application to network economics.
Peterson concludes the paper with, “we confirm past research that the long-term growth rate in users has considerable effect on the long-term price of bitcoin.”
Live Bitcoin (BTC) Price:
1 BTC/USD =$9,079.1965 change ~ -0.43%
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