1.

1 Possibility to predict the price of Bitcoin

For decades, the capacity to anticipate the stock market has piqued people's interest. Is it,
nevertheless, possible to forecast the stock market? The Efficient Market Hypothesis
(EMH) (Malkiel, 1989) was significant for stock market forecasting, and it claiming that
stock market prices are frequently influenced by new information, such as headline news.
Due to the unpredictability of news, stock market activity will follow a nonlinear structure
and can only be anticipated with a 50% accuracy. (Qian & Rasheed, 2007). Because there
are no fundamentals in the Bitcoin price market, the efficient market and random walk
theories will be used to investigate Bitcoin predictability. Aside from the instability of
news, the current study reveals that extremely early indications may be obtained from
online social media such as blogs, Twitter feeds, RSS, Google, and others can can provide
early indicators on forecast shifts in different economic and commercial variables
(Karppi & Crawford, 2016).

Google Search "Bitcoin": (Worldwide)

120

100

80

60

40

20

0
2009-11

2018-05
2008-11
2009-05

2010-05
2010-11
2011-05
2011-11
2012-05
2012-11
2013-05
2013-11
2014-05
2014-11
2015-05
2015-11
2016-05
2016-11
2017-05
2017-11

2018-11
2019-05
2019-11
2020-05
2020-11
2021-05
2021-11

-20

Figure 2. Google search graph of the keyword "Bitcoin" starting from 2008 - 2022; it
can be seen that the keyword has grown massive over time.
This thesis seeks to assess the predicted capacities of social media sources such as Google,
Fig. 2, Wikipedia, Fig. 3, and Twitter Fig. 4 on Bitcoin and, as a result, whether these
sources are immediately absorbed into pricing. Is there a way to gain an edge in the market
by predicting prices ahead of time? We all know that efficient markets have one
characteristic in common: at any given time, market rates represents all usable data and
adjust swiftly to incorporate new knowledge; therefore, it should be impossible to
outperform the market by using the same information that all investors already know,
except by chance.

Figure 3. Wikipedia page views of bitcoin and Ethereum over the last two years time.

Figure 4. Weekly followers of crypto exchangers for the last two years on Twitter
According to the notion of efficient markets, investors make reasonable decisions.
However, according to behavioral finance, decision-making may be irrational, and
various circumstances might sway investors. According to (Malkiel, 2003), new
information travels swiftly and is instantly absorbed into prices, ensuring that neither
technological nor basic analysis would be used to forecast potential rates. As a result,
investors cannot achieve above-average returns unless they assume above-average risks.
Nonetheless, even if the revelation of new information causes price adjustments, the no-
arbitrage6 requirement assures that such updated knowledge shouldn’t be utilized to
anticipate coming profit (La Porta et al., 2000).

E(πt+1|It) = Etπt+1 is a rational expectations Theorem. (1)

The projected rates of Bitcoin at the start of month t, tπt+1 should consider entire available
data I, at the start of month t and is as follows: {πt,πt−1,...}represents price of Bitcoin for
period t,t − 1 , ,... The market brokers do not neglect.

Based on internet data, a Bitcoin Price Model may be:

BCt+1 = θ0+ α1BCt + α2Twittert + α3Googlet + α4Wikit + εt (2)

The Bitcoin Price for the End of Time, BC is the Bitcoin price for time t, is the correlation
coefficient, Twitter is overall sum of tweets mentioning "Bitcoin" during period t, and
Google is the total number of quries for the phrase "Bitcoin" throughout time t. The error
keyword is divided by the amount of pageviews on Wikipedia's English.

The fact that the price of Bitcoin is not determined by any principles has ramifications for
the EMH's applicability in the Crypto space. Nonetheless, the value of Bitcoin has seen
many fluctuations (see Figure 2.1), so it is worth talking about where it came from. Even
though the thesis's goal would be to not to investigate capacity the crypto market, it
provides an essential foundation for assessing how information is assimilated into the
price, which is necessary to understand the fundamental reasons for Bitcoin price
volatility.