The price of bitcoin, ethereum and other cryptocurrency is determined by the mood of investors rather than any economic indicators, according to a new study.

Daniele Bianchi, an assistant professor of finance at Warwick Business School, found that the price patterns of the 14 largest cryptocurrencies reflect past returns of investors, combined with the hype and emotion experienced as they watch the value climb or fall.

“There is research showing limited similarities between <a href="#">Bitcoin</a> and gold, but looking across the 14 biggest cryptocurrencies the high volatility of their price means that they can hardly be seen as a reliable savings instrument in the short-term, let alone the long or medium term,” said Dr Bianchi, whose working paper on the subject is titled Cryptocurrencies as an Asset Class: An Empirical Assessment.

This behaviour can be attributed to the fact that bitcoin and other cryptocurrencies fall outside the remit of governments or financial institutions. Investing in digital currencies is therefore more similar to buying equity in a high-tech firm rather than a normal currency, the study suggests.

The volatile price of bitcoin reflects core ideas of the study, having swung between $6,500 and $10,000 just within the last six weeks.

Dr Bianchi warned that the current cryptocurrency market is akin to the dot-com bubble between 1997 and 2001 that saw excessive speculation in internet firms on the part of investors, eventually resulting in the collapse of many of the companies. “Most of these cryptocurrencies come to existence through unregulated crowd sales similar to IPOs, the so-called Initial Coin Offering,” Dr Bianchi said. “As a result, the market for crypto currencies may look similar to the dot-com bubble at the end of the 1990s, and it may be that only a handful of them survive, so for investors it is like choosing who will be today’s Amazon.

[bs-quote quote="You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven't been able to do it." style="style-19" align="right" color="#7fc4ff" author_name="Alan Greenspan" author_job="American Economist" author_avatar="%%bf_product_demo_media_url:{media.primary.quote-avatar}:'full'%%"]

“In general, we see 2018 being a strong year, but we see the larger and more established blockchains growing in dominance in 2018,” the research note said, highlighting ethereum as one of the other cryptocurrencies set to benefit. “Bottom line: We expect bitcoin and cryptocurrencies to behave similarly to prior years and rally during Consensus.” The turn-around in fortunes has been reflected across cryptocurrency markets, with ethereum, bitcoin cash and ripple all seeing significant gains since early April. Since then, bitcoin has suffered from its worst ever start to a year — fitting with some analyst theories that the world's most valuable cryptocurrency was experiencing a bubble. The rapid decline was followed by a relative period of stability that many cryptocurrency experts predicted would precede more gains.

Ethereum founder Vitalik Buterin said in February that cryptocurrencies "could drop to near-zero at any time," telling his Twitter followers to not put in more money than they can afford to lose. Since then, ethereum's price has fluctuated between $950 and $350 and currently hovers around $800. Others have been far more optimistic, with bitcoin expert Michael Jackson telling The Independent that he believed bitcoin would recover to its heights of last year, and even go well beyond.

[caption id="attachment_465" align="aligncenter" width="775"]<img class="wp-image-465 size-full" src="http://publisher.test/wp-content/uploads/2018/02/post-image.png" alt="" width="775" height="247" /> Source: CoinMarketCap[/caption]

The latest price is still only just over half of the highs bitcoin reached in late 2017, when it peaked close to $20,000. Since then, bitcoin has suffered from its worst ever start to a year — fitting with some analyst theories that the world's most valuable cryptocurrency was experiencing a bubble.

The rapid decline was followed by a relative period of stability that many cryptocurrency experts predicted would precede more gains. Ethereum founder Vitalik Buterin said in February that cryptocurrencies "could drop to near-zero at any time," telling his Twitter followers to not put in more money than they can afford to lose. Since then, ethereum's price has fluctuated between $950 and $350 and currently hovers around $800. Others have been far more optimistic, with bitcoin expert Michael Jackson telling The Independent that he believed bitcoin would recover to its heights of last year, and even go well beyond.