Bitcoin bubble researcher sees short term price stability

Bitcoin's consistency has been its unpredictability. From unprecedented highs to multiyear lows, the cryptocurrency’s elusive movement has been frustrating and difficult to predict.

"When analyzing the most current data, we see bitcoin prices likely to remain pretty stationary for the time being," says Marian Gidea, director of the graduate program in mathematical sciences at the Katz School of Science & Health at Yeshiva University. His team is developing a five-dimensional model to better understand bitcoin’s bubbles and bursts.

Crypto expert Elvira Sojli has a similar view of bitcoin’s near-term outlook. "Bitcoin will be on a downward trend, even though this will be a slow movement," she told FOX Business. Sojli is associate professor of finance and Scientia Fellow Alumni in the School of Banking and Finance at the University of New South Wales.

FTX bankruptcy ‘shattered trust’

Sojli says FTX’s bankruptcy shattered investor trust and cemented many investors’ views about potential conflicts of interest in a space where exchanges frequently issue their own tokens and are opaque about their intentions. The collapse also exposed system inadequacies such as the lack of regulation.

"BTC is still multiples above its value five years ago, with not much increase in usage or a better business case," she says. "I do not think investors have stopped selling, as there was a strong sell-off across crypto assets, but sometimes market participants stop and take stock of the environment and reassess their decisions."

Since FTX declared bankruptcy on Nov. 11, bitcoin has remained somewhat stable, closing above $16,000 on every day but one.

Second summer or crypto winter?

Is this current stability a second summer ahead of the next crypto winter or the start of something new?

Gidea’s model focuses on bubbles. It can only peer a few days into the future – at most.

"Particularly for bitcoin, we can only see with our method signatures that are very close to the actual crash. It can be days or hours, more likely hours than days," he told FOX Business.

However, he notes the end of the 2018 crash was followed by a period of relative stability, leading some observers to conclude bitcoin had finally matured and would develop into a fiat, or government-recognized, currency. Instead, bitcoin defied predictions, soaring to unprecedented levels. The coin reached $68,789.63 before crashing to a multiyear low of $15,599.05 on Nov. 21.

Tech stocks and interest rates

BIG TECH BRACES FOR RECESSION WITH LITANY OF HIRING FREEZES, LAYOFFS

Sojli notes many factors affect bitcoin’s price, including interest rate hikes, recalibration with stocks and alternative assets, and reliability and trust issues related to the crypto environment.

Many observers believe bitcoin moves higher when technology stocks rise and fall when interest rates increase. Gidea cautions it’s difficult to draw definitive conclusions given bitcoin’s fairly short history. The coin was created in 2009 by Satoshi Nakamoto, a presumed pseudonym for a person or persons behind the blockchain-powered currency.

"It’s a new phenomenon. We are interested to study and observe it," Gidea told FOX Business.

Black swans

ACCOUNTING RED FLAGS ARE COMMON AMONG PUBLIC CRYPTO COMPANIES

Gidea’s model cannot see the world outside of economics.

"Hype, media frenzy, criminal activities, and fraud, all contributed to having many wild run-ups and run-downs in the bitcoin price, like the most recent crashes in May, June and November of this year," Gidea said.

Sojli expects bitcoin to continue to experience price corrections until there are regulatory improvements and a proven business case for the need for cryptocurrency.

"We’ve seen very negative consequences of the lack of regulation," Gidea adds.

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According to CoinGecko, an average of 947 cryptocurrencies listed on its site fail each year, with a massive meltdown in 2021.

"The last bull market run that started in November 2020 saw a spike in cryptocurrencies listed, with more than 8,000 cryptocurrencies listed in 2021. As of today, nearly 40% have been deactivated and delisted from CoinGecko," said the world's largest independent cryptocurrency data aggregator.