Do infectious diseases explain Bitcoin price Fluctuations?

Abstract

This study examines Bitcoin price movements from an infectious disease perspective. The author compares the outbreak of the COVID-19 pandemic with the Bitcoin price explosion and adopts the SIR epidemiological model. The SIR model operates by categorizing the population of individuals into susceptible (S), infected (I), and removed (R). In the case of Bitcoin, open wallets represent the susceptible population, and the infection starts with a single individual. After conducting four estimation trials, the model that uses the recovery rate derived from the Bitcoin price downtrend and the infection rate from the upward trend has the highest accuracy. The estimation deviates from the Bitcoin price explosions by only three days. Previous studies commonly use faster-than-exponential growth or stationarity tests to identify bubble formations. This paper introduces a novel approach that employs epidemiological models to analyze Bitcoin's explosive price behavior.