April 10, 2018 249By Nathan Bentley
"We developed a theoretical model of an asset price with a pool of speculative investors and compared it with actual Bitcoin price behaviour to see what it might imply for the future dynamics; the model has clear parallels with compartmental models of the spread of an infectious disease in epidemiology." Essentially, as the hysteria around cryptocurrencies engulfed populations, the value increased. Much like with an infection, this can only last so long and thus, eventually an end point is reached. Again, according to Barclays:"As more of the population become asset holders, the share of the population available to become new buyers – the potential ‘host’ population – falls, while the share of the population that are potential sellers (‘recoveries’) increases. Eventually, this leads to a plateauing of prices, and progressively, as random shocks to the larger supply population push up the ratio of sellers to buyers (Figure 5), prices begin to fall. That induces speculative selling pressure as price declines are projected forward exponentially.” This is a really interesting method for analysing markets and provides a novel approach to something that can be quite mundane. I can imagine many economists really disliking this but if Business Insider are anything to go by, this seems to have worked, producing very significant findings. This does have real world applications, despite it sounding like a bit of fun. If epidemiology can be applied to crypto-economics then maybe we can use it to start to make real predictions about market trends and behaviours, where other predictions have fallen short in the past. This in turn will create an environment for safer and wiser investments. Or maybe, Barclays have just been very lucky with this one, who knows?