Disclaimer: This article is not financial advice.

In the article “Bitcoin’s natural long-term power-law corridor of growth”, we looked at bitcoin’s long-term price history and created a simple power-law based model to make predictions regarding bitcoin’s future price developments. This article is based on the previous article, but attempts to answer a different question: Is bitcoin currently over- or under-priced?

Answering this question perfectly is impossible, as this would require perfect knowledge of future prices. Instead, we attempt to build a model that is intentionally as simple as possible, and requires no manually chosen parameters. Yet, it is able to indicate when bubbles burst with remarkable precision. …

Disclaimer: This article is not financial advice.

With growing adoption of the cryptocurrency, its future price has been the subject of more and more speculation. Predictions are all over the board, with some economists like Nouriel Roubini predicting a price of 0 within five years, whereas John McAfee has famously predicted a price of $1 million per bitcoin by the end of 2020. Others have made predictions that fall within this very wide range [1].

Overall, bitcoin’s price has risen very quickly since it’s initial inception in 2009 and has also been subject to booms and busts. The rapid rises and boom phases seem to encourage people like McAfee to make very optimistic predictions about the future price, whereas the busts seem to encourage some economists to predict a decline toward 0. In this article we look at the full price history of bitcoin and see that bitcoin’s price evolution can be understood as moving within a corridor which is defined by two power-laws based on time. While the idea of modelling bitcoin’s price using a power-law is not new, in this article we give more support to this idea and provide some additional interpretations. …