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Calculation of R2
To what extent is there a Correlation between Price of Bit Coin over last twelve months
Table of content
Rationale
Recently, while surfing internet on my mobile, I have come across advertisements about bidding. I initially ignored them just like other advertisements but a few days back I came across few reviews which quite intrigued me into knowing about it more. It was about an app named Olympus Trade.
I was not at all sure whether it was genuine. It showcased interesting deals which grew the interest in me. As a teenager, I wanted to earn my own pocket money. This thought pushed me into gathering information about this app.
Once I decided to go along with it, the fear that it could be a fraud, persisted. As a result, I was determined that I would not invest a single penny without finding about it properly.
I went on to search all sources available. I came across the term 'Bitcoin'. My eyes popped out knowing the INR value of one bitcoin. Reading more about it, I went through all reviews, terms and conditions and much more.
After gathering enough information, I looked for its status in the last twelve months. It was very important for me to know how the bitcoin value changed over time and what the value was for a year. I looked at all possible sources but could not get an answer.
Unable to get a proper satisfactory answer, I decided to find it out myself before coming to a conclusion. So in this IA, I have tried to find the relationship between the price of bitcoin and time over a span of last twelve months.
Aim
The main motive of this IA is to find a correlation, if exist, between the price of Bitcoin and time over a span of 12 months. To make to study more accurate and detailed, the span of twelve months will be divided into four groups of 3 months each.
Research question
What is the relationship between the price of Bitcoin and time over a span of last twelve months?
Introduction
Bitcoin is a cryptocurrency which is currently very popular for purchasing and selling shares. It is a form of marketing which is used by several mobile apps. Customers usually buy a share of a bitcoin and sells accordingly. Based upon the price of the bitcoin at that moment, the consumer earns or losses his money. However, Bitcoin is often considered to be illegal in many countries as it is used in transactions executing criminal activities.
Data collection
The price of the Bitcoin over last one year has been collected from a statistical data present in an authentic website. The data is furnished below:
Figure 1 - Table On Price Of Bitcoin From 1st November 2019 to 31st January 2020
Figure 2 - Table On Price Of Bitcoin From 1st February 2020 To 30th April 2020
Figure 3 - Table On Price Of Bitcoin From 1st May 2020 To 31st July 2020
Figure 4 - Table On Price Of Bitcoin From 1st August 2020 To 31st October 2020
Graphical analysis
Calculation of R2
x
y
x2
y2
xy
Σx = 4278
Σy = 733375.097
Σx2 = 263810
Σy2 = 5902800
Σxy = 33977579
Figure 10 - Table On Processed Data For Calculation Of R2 For Group 1
r = \(\frac{n\bigg(∑xy\bigg)-(∑x)(∑y)}{\sqrt{[n∑x^2-\bigg(∑x\bigg)^2][n∑y^2-\bigg(∑y\bigg)^2]}}\)
=> r = \(\frac{92(33977579)-(4278)(733375.097)}{[92(263810)-(4278)^2][92(5902800547)-(733375.097)^2]}\)
=> r2 = 0.0042
x
y
x2
y2
xy
∑x2 = 247065
∑y2 = 5837903
Figure 11 - Table On Processed Data For Calculation Of R2 For Group 2
r = \(\frac{n\bigg(∑xy\bigg)-(∑x)(∑y)}{\sqrt{[n∑x^2-\bigg(∑x\bigg)^2][n∑y^2-\bigg(∑y\bigg)^2]}}\)
=> r = \(\frac{90(30001786.8)-(4095)(712404.228)}{\sqrt{[90(247065)-(4095)^2][90(5837903479)-(712404.228)^2]}}\)
=> r2 = 0.482
x
y
x2
y2
xy
∑x2 = 263810
∑y2 = 8198700818
Figure 12 - Table On Processed Data For Calculation Of R2 For Group 3
r = \(\frac{n\bigg(∑xy\bigg)-(∑x)(∑y)}{\sqrt{[n∑x^2-\bigg(∑x\bigg)^2][n∑y^2-\bigg(∑y\bigg)^2]}}\)
=> r = \(\frac{92(40700709)-(4278)(867394.736)}{\sqrt{[92(263810)-(4278)^2][92(8198700818)-(867394.736)^2]}}\)
=> r2 = 0.1001
x
y
x2
y2
xy
∑x2 = 263810
∑y2 = 11998253546
Figure 13 - Table On Processed Data For Calculation Of R2 For Group 4
r = \(\frac{n\bigg(∑xy\bigg)-(∑x)(∑y)}{\sqrt{[n∑x^2-\bigg(∑x\bigg)^2][n∑y^2-\bigg(∑y\bigg)^2]}}\)
=> r = \(\frac{92(49153924.2)-(4278)(1047804.62)}{\sqrt{[92(263810)-(4278)^2][92(11998253546)-(1047804.62)^2]}}\)
=> r2 = 0.0447
Conclusion
In this IA, a correlation has been developed between the price of Bitcoin in last twelve months from November 2019 to October 2020. To make the study more accurate, the span of twelve months has been divided into four groups of three months each. For the first group, i.e., between the November 2019 to January 2020, the price of the Bitcoin is almost constant over the extremities. However, a considerable variation is changed throughout the 92 days. As a result, value of the correlation coefficient R2 is very less and equal to 0.0042. Such a less value of correlation coefficient significantly denies the existence of the correlation and thus it can be concluded that there exist no definite correlation between the price of the Bitcoin with time over the above-mentioned duration. Nevertheless, the equation of the trendline is shown below:
y = -1.9167x + 91954
For the second group, i.e., between the February 2020 to April 2020, the price of the Bitcoin is decreased over the duration. However, a considerable variation is changed throughout the 90 days. As a result, value of the correlation coefficient R2 is very less and equal to 0.482. The value of the coefficient is at a mid-way between 0 and 1 which though denies the existence of the correlation but with such a less value, it can be easily concluded that the correlation is not uniform throughout the duration which is significant from the graph as well. Nevertheless, the equation of the trendline is shown below:
y = -39.719x + 2X106
For the third group, i.e., between the May 2020 to July 2020, the price of the Bitcoin is increased over the duration. However, a considerable variation is changed throughout the 92 days. As a result, value of the correlation coefficient R2 is very less and equal to 0.1001. Such a less value of correlation coefficient significantly denies the existence of the correlation and thus it can be concluded that there exist no definite correlation between the price of the Bitcoin with time over the above-mentioned duration. Nevertheless, the equation of the trendline is shown below:
y = 5.6541x – 239337
For the fourth group, i.e., between the August 2020 to October 2020, the price of the Bitcoin is increased over the duration. However, a considerable variation is changed throughout the 92 days. As a result, value of the correlation coefficient R2 is very less and equal to 0.0447. Such a less value of correlation coefficient significantly denies the existence of the correlation and thus it can be concluded that there exist no definite correlation between the price of the Bitcoin with time over the above-mentioned duration. Nevertheless, the equation of the trendline is shown below:
y = 6.6429x - 281492
Bibliography
- Antonopoulos, Andreas M. Mastering Bitcoin: unlocking digital cryptocurrencies. " O'Reilly Media, Inc.", 2014.
- “Bitcoin Price Index — CoinDesk 20.” CoinDesk, https://www.coindesk.com/price/bitcoin. Accessed 2 Nov. 2020.