Charlie Zhang

Introduction

Bitcoin is a cryptocurrency that has received substantial attention given its decentralized nature, innovations, and transparency. Meanwhile, the decentralized nature of Bitcoin makes the price fluctuate widely. Since the debut in the white paper by Satoshi Nakamoto in 2009, its price has increased by more than 650 times during the peak price at $69,000 in November 2021. The Bitcoin market has been increasingly correlated with the stock market, along with the investment inflow. That Bitcoin has begun to correlate with the stock market became implicit when the Federal Reserve reduced the rate and implemented the quantitative easing strategy to respond to the Covid-19. Similarly, in early January 2022, when the market prospected the potential rate increase, both stock (S&P 500) and Bitcoin markets have slumped.

The following are several questions that are worth asking:

• Is Bitcoin significantly different from other cryptocurrencies?
• Does Bitcoin fulfill Fama’s Efficient Market Hypothesis (EMH)?
• Have monetary policies affected Bitcoin’s price? If so, since when?
• Could we use Bitcoin's search index to predict the Price?
• Will deep learning methods (RNN, LSTM, etc.) outperform the traditional time series models (ARIMA/GARCH)? Under which circumstances?
• Can stock market predict Bitcoin?
• What are the price predictions for Bitcoin by 2022?
• What are the potential peak and bottom for Bitcoin prices in the following five years?
• What can we learn from Bitcoin’s daily/weekly/monthly/quarterly volumes?