Nowadays, Bitcoin is catching people’s attention through the news, radio, and social media. There’s no doubt that Bitcoin has become the hottest cryptocurrency when it’s price skyrocketed to $10,000 in October. Our team will focus on whether Bitcoin is worthy to buy from studying relationships between bitcoin, GDP, inflation and stock value, and short-term prediction of bitcoin price.

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Bitcoin Team
Team members: Hefei Wang, Kangling Song, Ha Anh Tran, Thi Ngan Ha Nguyen
1. INTRODUCTION
Nowadays, bitcoin is catching people’s attention through the news, radio, and social media.
There’s no doubt that bitcoin has become the hottest cryptocurrency when it’s price skyrocketed
to $10,000 in October. Our team will focus on whether bitcoin is worthy to buy from studying
relationships between bitcoin, GDP, inflation and stock value, and short-term prediction of bitcoin
price.
What is Bitcoin
Bitcoin is a digital currency that is mined by computers, it’s the most well-developed blockchain
technology application. Unlike traditional transactions, there’s always a trusted central authority,
such as, Paypal, to verify all of the transactions. Bitcoin users make transactions anywhere in the
world directly. There are bitcoin miners to witness and verify the transactions, and there’s no
outside agencies involved. Instead of paying a third authorization party, bitcoin keeps it inside
their system. Bitcoin miners get paid by getting a share of the transaction fee. The “Miners are
basically the hamster in the wheel that keep bitcoin’s network going” (BusinessInsider).
Why is Bitcoin better
Even though some governments are planning to compete with bitcoin by issuing their own digital
currencies, bitcoin would not be affected. Because bitcoin is a decentralized network, there is no
banks involved, and government and regulations don’t have direct control over bitcoin
(STEEMIT). When Chinese regulators shut down bitcoin exchange in mainland China, bitcoin
price dropped by over 40 percent (SMH). But only few days after, bitcoin price soared about 60
percent. The world’s voracious demands are making bitcoin less impacted by the government
restrictions. Bitcoin is considered as scarce asset. Government can decide however much money
to print, but there can only be 21 million bitcoins in circulation (INVESTOPEDIA). Right now,
there are 14 million bitcoins in circulation. The supply is limited, and the growth in demand is
unstoppable.
2. RELATIONSHIP BETWEEN BITCOIN AND OTHER VARIABLES
In fact, because of the decentralization of Bitcoin, the Bitcoin price is mostly not under the control
of any company, organization or government. However, there is still a question about which could
be the main factors that can influence the Bitcoin price. An article about “Some factors that
influence the Bitcoin price” on https://totalbitcoin.org/some-factors-that-influence-the-bitcoin-
price/) has listed the main factors such as Government regulation, Media influence, Stability of the
Bitcoin network, the Bitcoin Demand and Supply, Wider Mainstream Acceptance, Large
Businesses put into Fiat currency, Technological Changes and Innovations and Market
Manipulation. Additionally, for the sake of this project, Ly Ho who is an Australian Bitcoin
investor and also the author of the article: “Why blockchain and cryptocurrency will change the
Internet world forever and how you can take advantage of it” on https://steemit.com/ mentioned
that government policy, news, adoption, market manipulation and community could leave an
impact on Bitcoin price. He also mentioned that stock, gold and other crypto-currencies could

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affect the price of Bitcoin. However, for the analytics purpose of this project, only quantitative,
clear variables could be put into consideration to review their relationship with Bitcoin price.
2.1. RELATIONSHIP BETWEEN BITCOIN AND GDP
▸Find p-value with Regression

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‣p-value: 1.386e-08 (smaller than 0.05) so monthly Bitcoin price is affected by the monthly GDP
(based on data from 2015 to 2016).
Bitcoin price source: http://data.bitcoinity.org/markets/price_volume/30d/USD?t=lb&vu=curr
GDP data source: http://www.macroadvisers.com/monthly-gdp/

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2.2. RELATIONSHIP BETWEEN BITCOIN PRICE AND INFLATION RATE
▸Find p-value with Regression

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‣p-value: 0.6319 (bigger than 0.05) so monthly Bitcoin price is not affected by the monthly
inflation rate (based on the data from 2015 to 2016).
Bitcoin price source: http://data.bitcoinity.org/markets/price_volume/30d/USD?t=lb&vu=curr
Inflation rate data source: https://fred.stlouisfed.org/series/FII10

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2.3. RELATIONSHIP BETWEEN BITCOIN AND NASDAQ VALUE
▸Find p-value with Regression
‣p-value: 0.7592 (bigger than 0.05) so yearly Bitcoin price is not affected by the yearly NASDAQ
value
Bitcoin price data source: http://data.bitcoinity.org/markets/price_volume/30d/USD?t=lb&vu=curr
NASDAQ value date source: http://www.macrotrends.net/
In general, based on the above result, Bitcoin price could be affected by the economics indicator
such as GDP but not the inflation rate. Moreover, Bitcoin is not only exclusively decentralized but
also invulnerable by stock market growth (such as NASDAQ value in this case).

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3. SHORT-TERM PREDICTION OF BITCOIN PRICE
Bitcoin have been trading, selling and buying from various cryptocurrency markets such as Kraren,
Coinbase, Bitfinex…etc. For the project, we are focusing on Coinbase which is the most popular
Bitcoin online trading platform for Bitcoin in US Dollar. The first dataset we work with is a
Coinbase Bitcoin price dataset with monthly distributed data points from January 2015 to
November 2017. We then plot the dataset to examine for any trends or seasonality.
3.1.R Code for Plotting Bitcoin Price Chart
> bcp <- read.csv("bitcoinity_Price.csv", header=T)
> bc <- ts(bcp,start=2015,freq=12)
> plot(bc)
The chart shows no seasonality but we did notice a trend going upward and we decide a Time
series - Double Exponential Smoothing model would be best for our prediction.
3.2. R Code for Double Smoothing forecasting model
> bc <- ts(bcp,start=2015,freq=12)
> bc.DESmodel <- HoltWinters(bc, gamma=FALSE)
> bc.DESmodel
> plot(bc.DESmodel)
> predict(bc.DESmodel,2)
The model gives us the prediction of Bitcoin price for December 2017 is $8737.083 and January
2018 is $10561.102. The real time Bitcoin Price as of December 4th
, 2017 was $11.7.
The prediction the model gives us for December 2017 is not necessary inaccurate since Bitcoin
price changes significantly and the forecast number is for end of December, with the way Bitcoin
price is behaving there is no telling what direction it is heading to on the price chart.

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As we take a closer look at real time Bitcoin price chart, the price is increasing or decreasing
hundreds of US Dollars in matters of minutes. Below are charts showing Bitcoin price from 10:27
PM December 8th
, 2017 to 10:27 PM December 9th
, 2017. The value has decreased over $2000 US
dollars in matters of 24 hours. It has dropped significantly around 12:20 PM December 9th
and
came back up and gone down again.
Given that Bitcoin price changes dramatically quickly, we decide to run a second-time series
forecast with a daily database from January 2st
2016 to December 9th
2017 to see if we would get a
result that is closer to the real-time data.
3.3. R Code for the 2nd
set of data
> bcp <- read.csv("BitcoinityPrice.csv", header=T)
> bc <- ts(bcp,start=2016,freq=365)
> plot(bc)

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> bc.DESmodel <- HoltWinters(bc, gamma=FALSE)
> bc.DESmodel
plot(bc.DESmodel)
> predict(bc.DESmodel,2)
We noticed the same going upward trend and use Double Exponential Smoothing Model which
matches up perfectly with our chart
The model predicts Bitcoin Price on December 10th
and December 11th
are $16012.91 and
$16468.11 respectively. This dataset does give us a closer value compare to real time price of
Bitcoin however we can’t forecast unexpected events that would affect Bitcoin price. The
prediction gives us a good estimate of what Bitcoin Price would be within the next two days from
December 9th
,2017.
Cieśla, Kacper. “Data.bitcoinity.org (Beta version).” Bitcoinity.org,
data.bitcoinity.org/markets/price/7d/USD?c=e&r=day&t=l.
4. CONCLUSIONS
Based on these analyses above, it can be concluded that the price of bitcoins can be affected by
GPA, but not by inflation and stock price. Compared with other currencies, like USD, the price of
bitcoins is more stable, since dollars' purchasing value has declined significantly recent years
because of inflation. In other words, investing bitcoins is less risky.
Furthermore, the data model shows there will be a great growth in bitcoin price recently. So, our
team get a conclusion that bitcoin is worthy to invest at this time.

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Citation
1. Frank Chaparro - http://www.businessinsider.com/bitcoin-price-miners-making-killing-in-
transaction-fees-2017-8
2. Jessica Sier - http://www.smh.com.au/business/markets/bitcoin-is-beyond-government-
control-20170918-gyk3id.html
3. Nathan Reiff - https://www.investopedia.com/news/what-happens-bitcoin-after-all-21-million-
are-mined
4. Data.bitcoinity.org (beta version) -
http://data.bitcoinity.org/markets/price_volume/30d/USD?t=lb&vu=curr
5. Monthly GDP – http://www.macroadvisers.com/monthly-gdp/
6. 10-Year Treasury Inflation-Indexed Security, Constant Maturity -
https://fred.stlouisfed.org/series/FII10
7. NASDAQ value date - http://www.macrotrends.net/
8. Cieśla, Kacper. “Data.bitcoinity.org (Beta version).” Bitcoinity.org,
data.bitcoinity.org/markets/price/7d/USD?c=e&r=day&t=l.