The rise of bitcoin has comparisons with the spread of an infectious disease, according to economists who argue the digital currency may have peaked in value as more consumers become immune to its appeal.

Analysts at Barclays said the soaring value of the digital currency last year, when prices rose by more than 900%, was helped by new buyers being “infected” by the euphoria surrounding bitcoin. The price has since crashed from almost $20,000 before Christmas to less than $7,000.



Using studies from the world of epidemiology – the branch of medicine concerned with the occurrence, distribution and control of epidemic diseases – the bank’s economists built a model for bitcoin prices that assumed more people were now “immune” to the lure of making money on the new financial asset.

Q&A What is bitcoin? Show Hide Bitcoin is the first, and the biggest, 'cryptocurrency' – a decentralised tradeable digital asset. The lack of any central authority oversight is one of the attraction. Cryptocurrencies can be used to send transactions between two parties via the use of private and public keys. These transfers can be done with minimal processing cost, allowing users to avoid the fees charged by traditional financial institutions - as well as the oversight and regulation that entails. This means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it is hard (but not impossible) to trace a bitcoin transaction back to a physical person. The exchange rate has been volatile, making it a risky investment. Whether it is a bad investment is yet to be seen. In practice it has been far more important for the dark economy than it has for most legitimate uses, but with Facebook's announcement that it is launching a new digital currency - Libra - mainstream interest in bitcoin has surged.



They said prices tend to rise when “infections” spread from one buyer to another, transmitted by word-of-mouth between friends – especially to those with a “fear of missing out” on a chance to get rich quick. The rate of new entrants to the market helps to set prices, while more people losing money will lead to immunity.



Arguing that the “susceptible” population for the bitcoin bug has now fallen, the economists said the peak reached just before Christmas was probably the ultimate price that could ever be achieved for the digital currency.



“This occurs with infectious diseases when the immunity threshold is reached; ie, the point at which a sufficient portion of the population becomes immune such that there are no more secondary infections,” the economists said.



Using that logic and applying it to the plethora of other digital currencies, including the peers of bitcoin such as ethereum and ripple, Barclays said the overall value for all crypto assets may never surpass $780bn – roughly equivalent to the peak sum of all cryptocurrencies in early January.



Attempting to value cryptocurrencies is problematic for the world of traditional finance, as they come as a new form of asset with no intrinsic value promised by cash flow. That means their value is solely determined by what people are willing to pay for owning them.



Economists had previously warned of bitcoin becoming a dangerous speculative bubble with worrying comparisons to the tulip mania of the 17th century, when bulb traders in Amsterdam lost vast sums of money betting on the plant’s value before prices crashed.



Barclays said demand for bitcoin had generally been from speculative buyers since about 2015, which was well before the meteoric rise for the digital currency last year. The bank said speculative bet making was probably at or near its end, due to enough potential new “hosts” having become alive to its risks.