One of the main challenges of crypto assets in general is the volatility associated with their prices. Crypto assets are very volatile and the ability to predict crypto price fluctuations is an entire field of study in the cryptocurrency industry.
There are various kinds of analysis carried out on a crypto asset to determine its price trajectory and inform its trading decision. This analysis takes into observation the various factors that lead to price fluctuations and attempts to use that knowledge to make a profitable trade.
One of such analysis carried out on crypto assets is known as Technical Analysis and is believed by many experts to be the most trusted and near-accurate predictor of crypto price assets.
Bitcoin, the flagship cryptocurrency and the biggest crypto asset by market capitalization is no stranger to such analysis seeking the predict the price fluctuation of the asset.
It has been proven historically that Bitcoin price action affects the prices of other crypto assets analyzing Bitcoin is very important and highly sought after.
One of such attempts at Analyzing Bitcoin price is known as the Bitcoin Power Law Theory which is our topic of discussion today.
What is Bitcoin Power Law Theory?
Bitcoin Power Law Theory was birthed in 2018 by Giovanni Santostassi a Physicist and Financial analyst.
In simple terms, the theory is a chart that plots the price of Bitcoin versus time and then attempts to predict Bitcoin price up until 2040 based on a Power Law model.
According to Wikipedia, a Power Law in statistics is a functional relationship between two quantities, where a relative change in one quantity results in a relative change in the other quantity proportional to the power of the change.
The Power Law model for Bitcoin gained some credibility because it fits into various variables of Bitcoin such as price, hashrate, and the number of addresses.
The theory has been largely accurate for the past 15 years, but yet some critics of the theory believe that the theory is not entirely reliable because historic performance is no guarantee of future performance.
Bitcoin Power Law Predictions
Following the Bitcoin Power Law which plots the price of Bitcoin versus time based on a power model. Some predictions of Bitcoin price have emerged putting the credibility of the theory at stake.
The predictions come in ranges and are not pretty specific. They include
Bitcoin price at the end of 2024
- High: $375,000
- Medium: $80,000
- Low: $30,000
Bitcoin price by 2035?
Going by the law and extrapolating to 2025 critics expect the theory to even be less accurate. The prediction range for Bitcoin price is
- High: $4,500,000
- Medium: $1,400,000
- Low: $500,000
Criticisms of the Bitcoin Power Law Theory
Like any other scientific theory, the Bitcoin Power Law drew criticism and divided opinions among its speculators and observers.
Consultant and Bitcoin advocate Adrian Morris in a statement to Cointelegraph explained that while the Bitcoin Power Law had been touted as a predictive model for the future price of Bitcoin its legitimacy has been drastically overblown by its advocates.
Morris, another prominent critic of the theory faults the methodology of Power Law theory stating that the theory tries to provide a mathematical explanation of what is essentially a human system.
He strongly believes that the prediction of Bitcoin price falls under the realm of statistics and not Physics which is a study of the Nature and properties of Matter and energy.
Other critics of the theory referred to the theory as leveraging Hindsight bias and is more of a horoscope than an actual prediction model.
Conclusion
The Bitcoin Power Law despite its criticism remains one of the few prominent scientific studies on the crypto industry which is still relatively a new industry in the grand scheme of things.
The theory will surely pave the way for more scientific studies in the future as assets like Bitcoin continue to grow in price and attract more investment from both individuals and financial institutions.