My project aims to investigate the causes of cryptocurrency price fluctuations. I started buying small amounts of Bitcoin after Bitcoin plummeted to 2 million won. As I began to take an interest in cryptocurrencies, I encountered various pieces of information about each coin. However, I found myself trading regardless of that information when I actually made transactions. To find out whether this was because the information about the coins was meaningless or because of my own indifference, I chose this topic for further investigation. The main questions I wanted to address in this project were as follows:
1: Is "diversified investment" meaningful in cryptocurrencies?
If diversified investment doesn’t show much significance in cryptocurrencies(no difference in price movements between Bitcoin and other cryptocurrencies), then trading other cryptocurrencies essentially loses its meaning. Furthermore, this suggests that fundamental analysis on cryptos aren’t quite meaningful. I found high correlation between Bitcoin and others, which suggests diversified investment is meaningless.
2: In the case of Bitcoin, is "fundamental analysis" meaningful?
One of the significant attractions of Bitcoin is that transaction data is transparent, openly available to everyone. Because it's possible to know how much Bitcoin each address holds, there arises a question of whether this information can be used for price prediction. Additionally, I am interested in investigating whether factors such as hash rate, which represents mining difficulty, also influence the price. Therefore, I tried to make machine learning models based on on-chain data only to explain price data of BTC.
3: What affects the price of Bitcoin?
If fundamental analysis on BTC is meaningless, then what features should we look at to trade BTC? I checked correlations between BTC price and crucial financial data such as US Treasury, Chinese Treasury, stock indices, and the dollar index. KOSPI and Bitcoin have a strong negative correlation. Indices of US stocks showed a moderate correlation with BTC.
My project aims to investigate the causes of cryptocurrency price fluctuations. I started buying small amounts of Bitcoin after Bitcoin plummeted to 2 million won. As I began to take an interest in cryptocurrencies, I encountered various pieces of information about each coin. However, I found myself trading regardless of that information when I actually made transactions. To find out whether this was because the information about the coins was meaningless or because of my own indifference, I chose this topic for further investigation. The main questions I wanted to address in this project were as follows:
1: Is "diversified investment" meaningful in cryptocurrencies?
If diversified investment doesn’t show much significance in cryptocurrencies(no difference in price movements between Bitcoin and other cryptocurrencies), then trading other cryptocurrencies essentially loses its meaning. Furthermore, this suggests that fundamental analysis on cryptos aren’t quite meaningful. I found high correlation between Bitcoin and others, which suggests diversified investment is meaningless.
2: In the case of Bitcoin, is "fundamental analysis" meaningful?
One of the significant attractions of Bitcoin is that transaction data is transparent, openly available to everyone. Because it's possible to know how much Bitcoin each address holds, there arises a question of whether this information can be used for price prediction. Additionally, I am interested in investigating whether factors such as hash rate, which represents mining difficulty, also influence the price. Therefore, I tried to make machine learning models based on on-chain data only to explain price data of BTC.
3: What affects the price of Bitcoin?
If fundamental analysis on BTC is meaningless, then what features should we look at to trade BTC? I checked correlations between BTC price and crucial financial data such as US Treasury, Chinese Treasury, stock indices, and the dollar index. KOSPI and Bitcoin have a strong negative correlation. Indices of US stocks showed a moderate correlation with BTC.