Question

Question 1:

For the following assume you have a (2 years) time series data with the daily price of one cryptocurrency(or multiple cryptos) for example Bitcoin. Also, you have other variables such as S&P500, VIX, transaction volume, EMWA, and also one (or more if you like) attention factors that could be searches on "bitcoin" on google, number of searches on wikipedia etc. You can add more or remove some of the variables that are mentioned if you think that some shouldn't be used or that other should be included.

Answer a) and b), by explaining what statistical models you would use (for example VECM, ARDL, ARIMA, OSL regression). Also include why, and how you would use them.

A good answer would be similar to the "step by step guide to predict a stock using STATA, Eviews and Matlab".

a) If you plan to predict the price/return and  one (or multiple) cryptocurrency, how would you do it?

b) Explain how one (or multiple) cryptocurrency moves/depends on the variables?

Answer 1

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ANSWER:

a)Generally,Cryptocurrency is a digital type of currency in which several encryption techniques are used to regulate the generation of units of currency and also to verify the transfer of the funds those are getting operated independently of a central bank.

By observing the past data and also the performance of those cryptocurrency to the stock market of equities. When there is more liquidity in the economy these sort of cryptocurrencies will always increases in huge manner.Of course in many nations,cryptocurrency is not accepted legally and it is seen as a substitute only. This is due to the reason that, there wll be no chance of interventions of the third party into the regulation of the cryptocurrencies.

Hence, what i will do is,i will look after the past trends of the prices, which consists of the technical analysis tools such as moving averages, and also parabola because these moves are generally in cryptocurrencies are highly wild in nature and also if a particular one rides it for any short period, then he will get major piece of returns.And also if he gets caught on the other side then he will lose the major portion of the capital.

b) As cryptocurrencies are normally inter dependent on each other due to the reason that these are highly related to a pack rather than a single currency, And also if there is any movement in the whole cryptocurrency group there will be a movement in the individual crypto currencies, Which are genuine in nature and also which possess a legal value also those can be really used and incorporated into the modern world through the high acceptibilty.Therefore i would look after for various types of moving averages whether it may be daily, weekly,or any types of simple averages and hence i will do one thing, i will combine it with the volume related moment. Hence i would be getting a higher degree of assurance through taking my trades.