A Flexible Framework for Bitcoin Pricing

Abstract

Cryptocurrencies generate no contractual cash flows, so the discounted-cash-flow models used to value equities and bonds cannot be applied to Bitcoin, leaving its pricing without a conventional economic anchor. We address this gap with a flexible hybrid framework that combines a fundamental component, monetary policy, liquidity, and inflation expectations, with a speculative component built from autoregressive return dynamics, both estimated over rolling windows so their exposures can evolve as Bitcoin's market has evolved. Using daily data from 2014-2026, the selected rolling ARX(1), 56-day specification produces a sequence of one-step-ahead return projections whose accumulated path closely mimics Bitcoin's realized cumulative return across three boom-bust cycles (Figure 1). Building on that fit, the same rolling coefficients generate a forward-looking Bitcoin price distribution over the next six months (Figure 2). The paper's central contribution is this two-step link: a framework validated by how closely it reproduces Bitcoin's past return path is then used to project its future one, conditional on macroeconomic conditions remaining unchanged.