Historical Behavior of Bitcoin Prices

 

This study has an educational purpose, to help understand the behavior of the price of BTC, through a mathematical model of linear regression.

Procedure

  • In the annex to this work, we have the prices of Bitcoin in the years 2019, 2020 and 2021.

  • For each year we select the minimum, average and maximum prices that are presented in the following table:

  • Using the mathematical method of least squares (linear regression), to make the price projection for the year 2022, the following is obtained:

 

Analysis with minimum prices

If the investor buys a Bitcoin when the price is low, we have:

  •   In 2019 you buy a BTC at 3,438 USD and sell it in 2022 (3 years) at 14,214 USD, you get an annual return of 104%.

  •   In 2020 you buy a BTC at 6,412 USD and sell it in 2022 (2 years) at 14,214 USD, you get an annual return of 61%.

  •    In 2021 you buy a BTC at 10,777 USD and sell it in 2022 (1 year) at 14,214 USD, you get an annual return of 32%.

Analysis with average prices

If the investor buys a Bitcoin when the price is stable (neither high nor low), the results are as follows:

  •       In 2019 it obtains an annual return of 188%.

  •       In 2020 it obtains an annual return of 163%.

  •       In 2021 you obtain an annual return of 30%.

Analysis with maximum prices

If the investor buys a Bitcoin when the price is rising, the results are as follows:

  •        In 2019 he obtains an annual return of 264%.

  •        In 2020 he obtains an annual return of 302%.

  •        In 2021 he obtain an annual return of 30%.

Observations

        I.  BTC is a digital asset that provides high returns when bought, stored, and sold over periods longer than 2 and 3 years.

       II.   Although BTC prices show great short-term volatility, 3-year historical prices point to extraordinary returns of up to 264% per year.

  III.    As any investment, BTC also represents risks, studying in detail and selecting an appropriate strategy will give you returns that surpass other tradable assets such as stocks, bonds, commodities (gold and oil), index funds, etc. 

Annexed

BTC opening prices on the first of each month obtained from Investing.com.

 
Carlos Sampson