Firstly, the overall sentiment this year has predominantly been that the market is up about 68% till date and down 55% from its peak in January 2018.
This move has wiped out more than 300 billion dollars from the global crypto-markets. Most of this wealth lost though, has not been created in the Bitcoin market- per se. The ICO’s and altcoins have lost more than they have actually gained.
What do scholars say about bitcoin prices – and predictions?
In a recent paper in Economics letters, Andrew Urquhart (2017) shows the price-clustering property of bitcoin wherein Bitcoin prices always cluster around whole numbers. He reviews several papers, most notably Briere(2015) which shows that Bitcoin offers diversification for investors and his own paper where he shows that the random walk property prevalent in stock markets don’t hold. Again, Balcilar(2015) shows that Bitcoin volume can be a good predictor of prices except when there is a bull or a bear market and volume cannot predict volatility.
There is also a paper by Dwyer(2015) which shows that Bitcoin is more volatile than gold, foreign exchange currencies. More recently there is a seemingly growing set of studies investigating the effect of social media sentiments on bitcoin value (i.e. Feng Mai, etc… ), crowd sentiment on bitcoin prices, etc.. Exemplar work by Feng Mail et. al show that social media sentiments affect the prices of bitcoin and using two well accepted econometric methods demonstrate the effect of bullish and bearish tweets on future prices of bitcoin.
That being said the price of bitcoin and other digital assets (cryptocurrency) are highly volatile. Their prices are generally reflected by the demand and supply of the cryptocurrency in question and by user sentiment in markets.
Off late this sentiment has turned bearish on account of a) Persistent regulatory hurdles – for e.g. over the past year SEC has rejected more than 12 applications for Bitcoin Exchange Traded Funds. b) Lack of international support -many of the largest economies of the world e.g. China, India, etc. prevent fiat to crypto-trade. This leaves out more than 1/3rd of the global citizens from participating in the crypto economy. c) technical challenges in surfacing bad actors – over the past year more than 1000 Initial Coin Offerings or crypto-offerings have bombed – and the world is still counting the number of fake cryptocurrencies out there- from offering online grocery marketplaces to everything else.
The Promise of the Blockchain
Despite these negatives in the basic trade of crypto-currencies, blockchain has a technology is seeing tremendous innovation and is affecting almost all industries from supply-chain (e.g. IBM-Maersk partnership), to gaming(several new gaming platforms such as Tron, etc. are coming to the fore). Even incumbents such as Facebook, google are building blockchain based teams and recently Facebook has attempted to build a bridge the cryptomarkets with their own Libra cryptocurrency.