A group of Swiss computer scientists conducted a study that took a look at web activity and social media chat around Bitcoin. They concluded when there is a surge in chatter around Bitcoin that the cryptocurrency is bound for a fall.
The BBC took a look at the study:
Key variable
Bitcoin was a great candidate for research because so much of the activity surrounding it takes place online, wrote the team in a paper published in the Journal of the Royal Society. Bitcoins are a virtual currency which depend on people using their computers to both generate the cyber coins and to verify transactions carried out with them.
Currently one bitcoin can be exchanged for $585 (£347).
Studying the “digital traces” of this activity could help lay bare the variables that govern the way the virtual currency behaves said the team.
The four key variables that emerged from the analysis were:
- the size of the user base
- the number of searches for information
- the amount of information shared
- price
From this the team at the Federal Institute of Technology in Zurich managed to find two positive feedback loops that steadily influence how much each bitcoin was worth.
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