An Analysis on the Impact of Commodity Prices and Exchange Rates on the Price of Bitcoin

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Date: Feb. 28, 2018
Publisher: Athena Information Solutions Pvt. Ltd.
Document Type: Report
Length: 2,489 words
Lexile Measure: 1530L

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Byline: Dr. Alicemani, Likithakariappa P

Dr. Alicemani*, Likithakariappa P.

Department of Commerce, Christ University, Bangalore-560029

* Corresponding Author E-mail:


Bitcoin is the first decentralized cryptocurrency to be traded. There has been drastic increase in the price of bitcoin since 2013. Granger Causality analysis has been carried out to examine whether the price of commodities and the exchange rates helps in predicting the future price of bitcoin. For this study, the price of bitcoin, commodity prices and exchange rates have been considered from Jan 2103-Sep 2017.After the analysis it can be concluded that the price of commodities and the exchange rates does not help in predicting the future price of bitcoin. The past data of the price of bitcoin helps in predicting the future price of copper and British pound exchange rate with that of U.S dollars.Using Regression analysis, it can be determined that when the price increases by 0.0084 dollars there is one unit increase in the volume of transaction .Using variance analysis it can be observed that the price of bitcoin is more volatile compared to the price of commodities and the exchange rates.

KEYWORDS: Bitcoin price, commodity price, Granger Causality, Exchange rate, regression analysis, bitcoin exchange.


During the medieval times, gold, silver and copper coins were used as the mode of currency for trading purposes. Due to the passage of times, it shifted to paper money, plastic cards, and digital wallets now to bitcoin.This shift in the mode of currency for trading was to reduce the cost of transaction and avoid the risk of physical money. Bitcoin has brought a revolution in the field of cryptocurrency as it is the first cryptocurrency to be traded and used. It is a virtual currency, which is controlled by its developer, Satoshi Nakamato. It was introduced in the year 2009.

Bitcoin is a virtual currency or commodity which does not have a central authority or a bank as the transaction takes place directly between the users.

The number of bitcoins in circulation is limited to 21 million. All the transactions that take place in bitcoin are transparent as it is recorded in open ledger called as ''Blockchain". Currently bitcoin is being regulated by commodity future trading commission (CFTC) but it is not confirmed if CFTC will permanently take up the responsibility of regulating bitcoins.

How to get bitcoins? Bitcoin can be earned by exchanging the fiat currency with bitcoins in various bitcoin exchanges. Bitcoin ATMs was introduced in the year 2016.

This ATM machine empowers both purchase of bitcoin and also reclamation of bitcoin for money. It can be earned by accepting payments in bitcoins and through mining process. Mining is an attempt to verify whether the sender is the real proprietor and has not sent to numerous clients. There is a fixed reward for mining.In the year 2010 it was 50 bitcoins per block, 2014 -25 bitcoins and now it is decreased to 12.5 bitcoins. The reward is halved every four years. The price of bitcoin in the...

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Gale Document Number: GALE|A534819919