Bitcoin, the world's largest digital currency by market capitalization, could see that value cut by nearly 40% as the cryptocurrency continues its fall from record highs reached last year, according to two Swiss researchers. 

At a price of $7,327.15 as of 15:21 UTC on Tuesday, bitcoin has gained 540% over the last 12 months despite a 63% dip from its mid-December high near $20,000. (See also: NVIDIA Burned on Plummeting Crypto-Prices, Analysts at Odds.)

The highly volatile digital currency is overvalued and should suffer more steep price swings, according to Spencer Wheatley and Didier Sornette, both professors of entrepreneurial risks at ETH Zurich. The two wrote a paper dated March 16 citing Metcalfe's law, which indicates that the value of a network is proportional to the square of its number of users. By a generalization of that principle, the professors expect bitcoin's market value to plummet to $77 billion or lower, compared to its current near $125 billion. 

Beware an 'Increasingly Unstable State' 

As the growth of of new active bitcoin users slows, Metcalfe's law suggests that the cryptocurrency's market capitalization will also decelerate, wrote the researchers. The paper, which was recently highlighted by the MIT Technology Review, also included "Log-Period Power Law Singularity," a mathematical model for analyzing speculative bubbles. Wheatley and Sornette found four distinct bitcoin bubbles that corresponded to the model and "were followed by crashes or strong corrections," including South Korean regulators' threat to shut down crypto-exchanges and dating back to a 2011 hack at the now-defunct Mt. Gox bitcoin exchange. 

While bitcoin bulls see prices recovering as fears ease regarding heightened regulation around the world, championing the idea that blockchain technology will transform the world, the academic researchers contend that a mathematical analysis signals the contrary. 

"Looking forward, our analysis identifies a substantial but not unprecedented overvaluation in the price of bitcoin, suggesting many months of volatile sideways bitcoin prices ahead (from the time of writing, March 2018)," read the paper. "We emphasize that one should not focus on the instantaneous and rather unpredictable trigger itself, but monitor the increasingly unstable state of the bubbly market, and prepare for a correction." (See also: Bitcoin Will Become World’s ‘Single Currency’: Dorsey.)