Bitcoin Price Forecasting Models

Are there plausible ways to forecast the price of bitcoin? In their March 2021 paper entitled “Bitcoin Price Forecast Using Quantitative Models”, Daniele Bernardi and Ruggero Bertelli examine fundamental bitcoin value from four perspectives:

1. Stock-to-Flow modeling that addresses evolving scarcity based on quantity of bitcoin already present in the world (Stock) and quantity of bitcoin extracted each year (Flow).
2. How bitcoin price bubbles relate to the halving rule (planned 50% reductions in the reward for successfully mining bitcoins).
3. Demand modeling based on the rate of bitcoin adoption.
4. Supply modeling based on costs and revenues of bitcoin production, emphasizing the role of hash rate (evolving system security).

Based on Bitcoin design and bitcoin price data spanning 2009 through 2020, they conclude that: (more…)