(Kitco News) - Bitcoin is likely to mean-revert towards January 2017 levels of around $900, paving the way for precious metals like silver to prosper, according to research from Bloomberg Intelligence (BI).

In a recent webinar, Mike McGlone, senior analyst at BI said that he remains bullish on blockchain technology, but the digital currency market appears to be overvalued. He added that the speculator frenzy around bitcoin is not reflective of the coin’s original purpose as a peer-to-peer electronic cash system, which has now become a “conduit to other cryptos.”

“The space is not what it’s designed to be, at least not right now,” McGlone said in the webinar. “A peer-to-peer (P2P) electronic cash system is exactly what it’s supposed to be, and it’s really transmogrified and a bit more of a speculative, frenzied way to get to other cryptocurrencies.”

McGlone noted that the entire crypto market is plagued by oversupply, with the 12-month rate of change of cryptocurrencies outstanding currently at over 8,000%, while on the demand front, the number of unique addresses for bitcoin has dropped at the greatest pace since inception in 2009.

“The only way to reduce [excess supply] is prices,” he said, citing the emergence of forks and “copycats” as a main reason for bitcoin’s increasing supply.

Bitcoin’s price is likely to “gravity pull” towards $900, which is the mean price since bitcoin sustained above $1 in 2011, the senior analyst at Bloomberg Intelligence said.

The largest digital currency last traded at $6,794, down 65% from all-time highs in December, 2017. $900 would represent a further 87% decline from current levels.

Silver and bitcoin have historically held an inverse relationship, as risk-seeking retail investors flocked to the largest cryptocurrency when it rallied and took money out of silver, which is often called leveraged gold.

“The most recent parabolic cryptocurrency stretch (2012-14) coincided with the opposite in silver as the metal plunged from a three-decade high in 2011,” McGlone said in a recent report by BI.

Silver has been trading range-bound, but is set to test the $18 an ounce resistance level, said McGlone.

“Silver's 52-week range is the most compressed in 15 years and appears unsustainable,” the report said. “Silver's extreme compression projects a revisit of 2016's high. Sustaining below the December low would indicate failure.”

The report added that silver is poised to break out higher, following traditional drivers such as the Bloomberg Industrial Metals Spot Subindex, which gained 20% since November, and gold, which is up 6% for the period.

“Similar velocity changes in these key drivers equate to about a 30% 12-month rate of change for silver,” the report said.