Realized volatility and price determinants of Bitcoin

Abstract

This paper presents an analysis of Bitcoin Price and Realized Volatility. Particularly, this work is concerned with price dynamics of Bitcoin crypto-currency and examines the relationships between Bitcoin Price and popularity of the Blockchain technology, as well as the relationship between Bitcoin Realized Volatility and overall market volatility measured by the CBOE Volatility Index. The mentioned relationships are considered through the lens of ARIMA and Granger Causality statistical models. We find that an ARIMA(1,1,1) model very well describes the recent price dynamics of Bitcoin and can serve as a solid ground for making future forecasts. Furthermore, we find that there is a bidirectional causality between Bitcoin Price and Blockchain popularity, and a unidirectional causality relationship between Bitcoin Realized Volatility and the CBOE Volatility Index.