The Analysis of Factors Affecting Bitcoin Price

Abstract

As a popular cryptocurrency, Bitcoin has been an important investment tool in recent years. This study aims to analyze the factors that affect the Bitcoin price to help investors make better investment choices. Applying the simple linear regression model and Granger causality test to the data from January 2015 to December 2021, the research first examines the stationary of the data and then studies the relationships between Bitcoin price and other factors including Dow Jones Industrial Index, U.S. currency in circulation, U.S. disposable income. According to the result, all three factors have a positive effect on the price of Bitcoin and the Bitcoin price will in turn influence the Dow Jones Industrial Index and U.S. disposable income. This finding helps explain how certain economic indicators and Bitcoin prices interact. Since investment is always risky, investors must consider certain factors like the trend of DOW, M2, or PCI in advance to make a reasonable investment decision.