The Predictive Power of Bitcoin Return for American Major Stock Indexes Return

Abstract

Virtual currency has become one of the most sought-after alternative assets in the past decade with bitcoin being a leading example. value leapt from its starting price of $0.0025 to increase by more than 40 million times that amount, creating one of the greatest rises in value in the entire history of finance. In the past few years, many academic studies show that even though Bitcoin runs independently from traditional finance, but still there is a high correlation between Bitcoin and stock market. In particular, following the introduction of Bitcoin options back in 2017, Bitcoin now appears more predictive of stock return movements than before. Research by Afees A. Salisu and his coworkers display that a solitary Bitcoin price prediction model using an optimized predictive regression framework notably surpasses older ones. but don’t say how long this goes on Therefore this research will go to try and determine the time frame when Bitcoin is better at predicting the future of the stock market as opposed to stock options. Also, we’ll use machine learning techniques to train machine learning models to predict the movements of the stock market and see if they work.