What is bitcoin worth? This was the question on many minds as the cryptocurrency’s price soared last year, and has remained a puzzler as Lamborghini-coveting investors have watched the rally run out of gas in recent months. Researchers from Goldman Sachs, as well as Nobel prize-winning economist Robert Shiller, have warned about the futility of trying to value the digital asset with traditional means.
However, analysts at Barclays think they have a useful method for tracking bitcoin trends—infectious disease models. And by their reckoning, the crypto fever may have broken.
Barclays divides the global population into three categories: vulnerable people who are susceptible, those who are infected (some of whom are recovering), and those who are immune. Transmission takes place through cocktail party conversation, blogs, tweets, and news reports. The fear of missing out is a symptom of the infection, which is defined as buying cryptocurrency.
Does it seem like everybody has an opinion about bitcoin these days? Indeed, according to studies cited by Barclays analysts led by Joseph Abate, 90% of South Koreans are aware of the original cryptoasset, 88% of Japanese know about it, and American awareness is around 75% or higher. However, willingness to own crypto, at between 3% and 10%, is much lower, according these studies.
An inflating asset bubble can have multiple peaks as awareness spreads, according to Barclays. Surveys suggest that many of the people in developed markets who are willing to bet on bitcoin already know about it. Once that happens, “upward pressure on prices stalls,” and speculative bitcoin holders are more likely to sell (that is, recover from the infection). Further price increases are less likely because those susceptible to bitcoin FOMO (a small share of the population) already know about it, according to Barclays.
The analysts estimate that the ceiling for the total crypto market is between $660 billion and $780 billion, which are levels that were reached in January. “The speculative froth phase of crypto currency investment—and perhaps peak prices—may have passed,” they wrote.
Wall Street pedigrees aren’t necessarily protection against infection, but analysts at Goldman Sachs seem to be immune. “The crucial question underpinning the real value of cryptocurrencies themselves is what economic problem they actually solve,” according to Allison Nathan, a senior strategist at Goldman Sachs. She said gold appears to be a superior store of wealth, though bitcoin could be useful in countries without stable currencies.
Yale’s Shiller has also suggested that traditional financial analysis is confounded by manias, but psychology and neurological research into human decision-making could have promise. The economics professor told Quartz last year that “there really are idea epidemics,” which tend to spread through compelling narratives.
In a post-crisis world, amid doubts that big financial institutions can be trusted, Bitcoin’s story—that it flouts central control and is kept pure by encryption—is certainly catchy. Infectious, even.