Bitcoin May Evolve Into What Everyone Fears, Mathematicians Say

Prices of cryptocurrencies such as Bitcoin may never stabilize, and digital tokens risk simply ending up being the equivalent of Ponzi schemes.

Using mathematical modeling and experimental economics, two University of Pittsburgh researchers tried to determine Bitcoin’s value, and concluded that it’s “an asset which has no value by traditional measures” and may be in a bubble. Its price is largely driven by the opinion of fringe buyers, often holding erroneous views. As these fringe buyers run for cover, worried that their investment is not as secure as they thought, the price plummets. It goes up when the fringe buyers feel safe enough to step back in, they wrote.

“The cryptocurrencies may simply be a mechanism for a transfer of wealth from the late-comers to the early entrants and nimble traders,” the authors, Carey Caginalp and Gunduz Caginalp, said in the paper published Wednesday…

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