> Ciaian’s study develops an empirically estimable model of
Bitcoin price, which accounts for supply and demand fundamentals,
investors’ interest and macroeconomic development
(1).
p
B
t = β0 +β1pt +β2yt +β3vt +β4bt +β5at +β6mt +t (1)
In this model at time t, p
B
t
is the price of Bitcoin, pt
is the general price of goods and services, yt is the size
of the Bitcoin economy, vt is the velocity of the bitcoins
in circulation, bt is the total stock of bitcoin in circulation,
at captures Bitcoins attractiveness to investors, mt captures
the global macroeconomic indicators, t is an error term and
βi
, i = 0, 1, ..., 6 are coefficients which weight each term.<p>Go ahead and trade bitcoin based on that formula, I dare you:)<p>It reminds me a bit too much of the drake equation <a href="https://en.wikipedia.org/wiki/Drake_equation" rel="nofollow">https://en.wikipedia.org/wiki/Drake_equation</a><p>or maybe more appropriately this form of the drake equation:<p><a href="https://xkcd.com/384/" rel="nofollow">https://xkcd.com/384/</a><p>I haven't gone through the referenced paper's but the below also seems a bit dubious..<p>> Ciaian et al. found a high correlation (corr > 0.8) between
the DJIA (Dow Jones Industrial Average) and the total stock
of bitcoins and the size of the Bitcoin economy.<p>How these are so closely correlated eludes me but maybe the reference papers will expand on this.<p>Having said all of that, the section 5 Factors unique to bitcoin is pretty good. And considering the lack of literature on how to trade bitcoin it's nice to see someone take the time to try and apply some rigor to the subject.<p>Hat's off to the author.<p>I haven't spend much time looking at it but the time I have spent show that it does trade differently from a typical currency.<p>Sadly the Trading Bitcoin section doesn't contain alot of actionable code or information but that hardly makes it unique in the world of trading.