On the Predictability of Bitcoin Price Movements: A Short-term Price Prediction with ARIMA

Mohamed Khalil Benzekri and Hatice Şehime Özütler ()
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Mohamed Khalil Benzekri: Istanbul Aydin University, Institute of Graduate Studies, Business Administration, Istanbul-Turkey
Hatice Şehime Özütler: Istanbul Aydin University, ABMYO, Foreign Trade Department, Istanbul-Turkey
Authors registered in the RePEc Author Service: Hatice Şehime ÖZÜTLER

Journal of Economic Policy Researches, 2021, vol. 8, issue 2, 293-309

Abstract: Daily transactions in cryptocurrencies have long been following an ascending tendency, with Bitcoin leading the charge. Daily transactions recorded in the system increased from 7000 trade per day in 2012to more than 1 million nowadays. The study aims to examine the utility of cryptocurrencies specific to Bitcoin and diagnose how predictable its price fluctuations and the volatility of the crypto market. Because the dilemma between risk aversion and return maximization became evident for investors with high yielded digital assets in a zero-lower bound environment. Hence the predictability of its price movements in the short run may shed some light on the price formation of Bitcoin. Using an ARIMA model in forecasting Bitcoin price due to its response to short-term data, the study revealed that ARIMA (1,1,0) is efficient in forecasting quarterly price movements for the last two quarters of 2020, and the deviation of its price in this period might suggest a change in its perceived investment value to investors as a digital asset after the outbreak of COVID-19.

Keywords: Volatility Forecasting; Crypto Market; Market Microstructure; Asset Pricing; Bitcoin JEL Classification : G170; G150; G120 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ist:iujepr:v:8:y:2021:i:2:p:293-309

DOI: 10.26650/JEPR.946081

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