Benefits from considerable network
Bitcoin benefits from considerable network effects as a means of speculation
and payment So far, there are no tools to
determine the fair price of bitcoin
All in all, there are currently no tools to determine the fair price of bitcoin. It is
therefore difficult to say whether bitcoin is indeed overvalued. Rather, from an
economic vantage point, the cryptocurrency is a new asset class, which for now
is mainly an object of speculation. In addition, it is subject to multiple network
effects.
The price of bitcoin might therefore rise further. If the number of bitcoin
users, traders, developers and miners increase, demand and, in turn, prices
might rise as well. Towards the end of 2017, the number of registrations in
bitcoin exchanges exploded and temporarily boosted the price. Whether and for
how long this effect continues will depend on whether more and more people
believe that everyone believes that everyone else believes … That bitcoin will
establish itself as a new store of value and means of payment. Every new
registration and every new user will potentially increase the trust in bitcoin, in
particular if the new users use bitcoin for payment and not just for speculation
purposes.
If, however, people lose trust in the system, for example due to a
hardware or software bug within the bitcoin system itself or due to cyber attacks
or regulatory intervention, the fact that it is impossible to determine a fair price
might turn out to be a major disadvantage. If everyone rushes for the exits at the
same time, prices might collapse indeed.
EU Forecast
euf:b.a18b:174/nws-01