Bitcoin Spreads Like a Virus
14 Pages Posted: 23 Apr 2019 Last revised: 25 May 2019
Date Written: March 20, 2019
We illustrate, by way of example, that Bitcoin’s long-term price is non-random and can be modeled as a function of the logistic growth of number of users n over time. Using observed data for both Facebook and Bitcoin, we derive the relationships between price, number of users, and time, and show that the resulting market capitalizations likely follow a Gompertz sigmoid growth function. This function, historically used to describe the growth of biological organisms like bacteria, tumors, and viruses, likely has some application to network economics. We conclude that the long-term growth rate in users has considerable effect on the long-term price of bitcoin.
Keywords: bitcoin, cryptocurrency, valuation, growth model, network economics, network effect, Metcalfe's Law
JEL Classification: C22, C49, C51, C53, C58, D85, E40, E42, E49, E51, G12, G17, L14
Suggested Citation: Suggested Citation