Cryptocurrency major Bitcoin is overvalued and its market value should plunge before year-end, according to Swiss researchers.
A study conducted by ETH Zurich showed that the values for the market cap indicate a current over-valuation of at least four times.
In the paper, "Are Bitcoin Bubbles Predictable?", the researchers 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."
Citing "Metcalfe's law", Spencer Wheatley and Didier Sornette, both professors of entrepreneurial risks at ETH Zurich, stated that bitcoin's market value by the end of the year should be no more than $77 billion.
Metcalfe's law, accredited to Bob Metcalfe, Ethernet inventor and founder of the computer networking company 3Com, says the value of a network is proportional to the square of its users.
The researchers noted that once Bitcoin is valued in this way, it becomes possible to see when it is overvalued, and that a market crash is imminent.
The study says the growth of new active bitcoin users is slowing. As per the Metcalfe's law, the movement shows that the cryptocurrency's market capitalization will not grow as quickly as it has.
The researchers diagnosed four distinct bitcoin bubbles that correspond to Log-Periodic Power Law Singularity model, a mathematical model for evaluating speculative bubbles. These were followed by crashes or strong corrections: one each in 2011, 2012 and 2013 plus the most recent at the end of 2017.
Bitcoin's price multiplied more than 13 times last year. At the end of 2017, the price of bitcoin peaked at almost $20,000, and the combined market capitalization of cryptocurrencies reached around $800 billion. But, the price fell 50 percent in the first three months of 2018.
According to coinmarketcap, bitcoin is currently valued at $6,825.27, with a market cap of $115.75 billion.
The paper said, "We emphasize that one should not focus on the instantaneous and rather unpredictable trigger itself, but monitor the increasingly unstable state of the bubbly market, and prepare for a correction."
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