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1

Estimating the Beta of Bitcoin

Abstract
This paper seeks to estimate the beta of bitcoin against five different portfolios. Two of
the portfolios are to see if any insight can be made into bitcoin pricing through a Capital
Asset Pricing Model analysis. Three of the portfolios are to see if any empirical data can
be used to develop insight into the classification debate surrounding bitcoin. The paper
begins with a discussion of bitcoin, bitcoin price history, and the bitcoin classification
debate, then discusses beta, how beta is calculated, and beta adjustments for asynchronous
data, followed by a discussion on purpose and methodology, then the results in detail, and
finally a summary of the results and their implications.

Bitcoin
Bitcoin is a peer to peer payment system which was proposed in 2008 and introduced January 3rd
2009.1 An important distinction is necessary for clarity between bitcoin the payment system and bitcoin
the token of the payment system, for the purposes of this paper bitcoin refers to the token. Bitcoin
prices have been incredibly volatile, undergoing several bubbles and collapses in its short life. From
January to October of 2011, the price went from $0.90 to almost $30 then back down to approximately
$3. From January to July of 2013 the price went from $13.50 to over $230 then back down to around
$100. The largest bubble to date occurred in late 2013 and early 2014 which saw the price skyrocket to a
peak of more than $1100 and fall back down dramatically. Charts graphing these dramatic price
movements are included in the appendix to this paper. With these incredible price movements it would
seem that all risk of bitcoin returns would be idiosyncratic, with little to no market influence observable.
This seems to be a decent hypothesis, however to the best of my knowledge empirical evidence
supporting this remains unpublished.
Much debate surrounds the classification of bitcoin; it might be a currency, commodity, or even
perhaps some new asset class. For many, the bitcoin token would be most aptly classified as a currency,
indeed it is often called a cryptocurrency. The US Financial Crimes Enforcement Network agrees with
this, and has ruled that virtual currencies are no different than traditional currencies when it comes to
compliance with money transmission regulations.2 However, there are others that disagree with this
classification. For example, the US Commodities Futures Trading Commission has publicly stated that it
believes bitcoin to be a commodity covered by the Commodity Exchange Act.3 Bergstra and Weijland
(2014) have proposed that bitcoin is a new asset class which they have termed Money-like Information
Commodity.4 The debate surrounding bitcoins classification is far from being resolved, and

commentators have largely taken a conceptual approach. Thus far no one has searched for empirical
indications that could shed light on this debate.
Beta ()
Beta () measures the systemic risk of an individual asset when compared to a benchmark
portfolio. The benchmark portfolio can be any portfolio, although the meaning of beta changes
depending on which benchmark it is calculated against. There are three equivalent ways to calculate
beta, perhaps the simplest calculation to understand would be from correlation and volatility, which is

( , )
2

Where is the beta of the asset against portfolio ,


is the correlation of asset against portfolio ,
is the sample return of the asset, is the sample return of the portfolio,
is the standard deviation of the asset, and is the standard deviation of the portfolio.
This calculation is identical to the calculation from covariance and variance, which is

(, )
2

Where is the beta of the asset against portfolio ,


( , ) is the covariance of the returns of asset against the returns of portfolio ,
and 2 is the variance of the portfolio.

For the purposes of the Capital Asset Pricing Model (CAPM), the benchmark portfolio is taken to be the
Market Portfolio, a weighted sum of every investable asset. The CAPM analysis attempts to calculate
the assets appropriate return when its beta is known. Roll (1977) critiqued the CAPM showing that there

are many problems inherent in creating or even observing a Market Portfolio.5 Because of this difficulty
practitioners often substitute a market tracking index for the purposes of calculating beta. When viewed
in the light of the CAPM, the definition of beta is a regression of asset returns against portfolio returns.
This is especially useful for illustrating the idea of beta as the amount of systemic risk from a portfolio
in an asset. The regression definition is
= , + +
Where is the sample returns of asset ,
, is the alpha (excess returns) of asset against portfolio ,
is the beta of the asset against portfolio ,
is the sample returns of portfolio ,
and is the idiosyncratic risk of asset .
Although for the purposes of the CAPM the benchmark portfolio should attempt to include the weighted
sum of as many assets as possible, beta can also be calculated against other portfolios. For example, beta
calculated against an individual investors portfolio would show that investor the rate at which risk is
added to the portfolio by adding the asset.
There exists a problem in estimating betas from real world trading information which is caused
by asynchronous price observations. For example, if we have price observations for the benchmark
portfolio occurring regularly (frequent trading) while price observations for the asset occur infrequently,
a specific periods last price information might have occurred at different times and therefore have
different information impounded in it. This informational asymmetry can lead to an imperfect estimation
of beta. To tackle this issue, Scholes and Williams (1977) proposed estimating leading and lagging
betas, betas calculated on next and previous period returns, and then summing all calculated betas and
adjusting for autocorrelation.6 This produces a fairly good estimation of beta, but has the problem of

producing high error rates. To further improve on this theory Dimson (1979) proposed a trade-to-trade
beta which adjusts the regression to account for time differences between price observations instead of
the entire period.7
Purpose and Methodology
I am interested in estimating the beta of bitcoin for many reasons. First and foremost this inquiry
has not to my knowledge been rigorously performed yet, and is a very interesting topic which I think
deserves to be researched, especially in relation to the two CAPM analyses. In addition to this, if
noteworthy results are obtained from the other analyses, it could potentially shed light onto the debate
surrounding the classification of bitcoin. To attempt the CAPM analysis, I ran beta, Sholes-Williams
beta, and Dimson beta calculations of bitcoin against both the S&P 500 and the FTSE Global All Cap
Index (tracked by ETF VT). I have made the same calculations against three other portfolios to see if
there is potentially any empirical insight to be had in relation to the classification debate surrounding
bitcoin. The three other portfolios chosen are the Bloomberg Dollar Spot Index which tracks a basket of
10 currencies against the US dollar (BBDXY),8 the historical spot price of gold (XAU), and the
Bloomberg Commodity Index (BCOM).9 All analyses were performed across a variety of time series
and data resolutions, namely five years of monthly data, approximately five years of daily data, one year
of daily data, and three months of ten minute data. All data was retrieved from the Bloomberg
Professional service on October 20th 2015. All dollars are US Dollars. A beta of near 1 or greater than 1
would indicate that bitcoin prices contain systemic risk related to the benchmark portfolio. Because
bitcoin is very volatile, a result near 0 would indicate that bitcoin prices are uncorrelated with the
benchmark portfolio and do not share systemic risk. A result of negative 1 or less than that would
indicate that bitcoin could function as a hedge against systemic risk from the benchmark portfolio.

S&P 500 (SPX)


The S&P 500 is an index of 500 large cap companies from the United States.10 The beta of
bitcoin calculated on five years of monthly data against the S&P 500 was performed by calculating the
covariance of bitcoin and S&P 500 returns and dividing by the variance of S&P 500 returns. The
resulting beta of 5.05 is a rather interesting result as it would indicate a high level of shared risk,
however as we see below the scatterplot of returns does not produce much confidence in this result.

Bitcoin vs S&P 500 Monthly Returns 5 Years


500%

Bitcoin Returns

400%
300%
200%

y = 5.0469x + 0.2407
R = 0.042

100%
0%
-100%
-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

S&P 500 Returns

There are many extreme outliers, the most notable example of this being November of 2013, when
bitcoin had a return of 451% while the S&P 500 returned 2.8%. This result comes with a very low 2 ,
indicating that the regression is a poor descriptor of the data.
To capture a higher resolution, the same calculation was done on daily data for approximately 5
years. In order to compensate for asynchronous data, both the Sholes-Williams and Dimson betas were
calculated on this data set. The beta without adjustment was 0.35, and after Scholes-Williams
adjustment rose to 0.52. The scatterplot of returns is as follows:

Bitcoin vs S&P 500 Daily Returns 2010-2015


80.0%

Bitcoin Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

S&P 500 Returns

As can be seen from the data, no real regression can be honestly performed as there is no relationship in
the data. Dimson adjusted returns heavily impact data points which are temporally close to each other, as
asset returns are adjusted by dividing by the square of the time difference from the previous data point,
and portfolio returns are adjusted by dividing by the inverse of the squared time differences. The
Dimson beta of this data set is 0.24, however as we can see from the scatterplot found in Figure 5 in the
appendix this result also does not carry much weight.
To see previous results with less noise but still a significant amount of data, identical calculations
were performed on one year of daily data. The beta of this data set was found to be 0.37, and after
Sholes-Williams adjustment rose to 1.07, however as seen in the scatterplot below the regression is a
poor descriptor of the data with an 2 of only 0.0089.

Bitcoin vs S&P 500 Daily Returns 2014-2015


20.0%
15.0%

Bitcoin Returns

10.0%
5.0%
0.0%
-5.0%

y = 0.369x - 5E-05
R = 0.0089

-10.0%
-15.0%
-20.0%
-25.0%
-5.0% -4.0% -3.0% -2.0% -1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

S&P 500 Returns

After the Dimson adjustment the beta was calculated to be 0.28, but again the low 2 of 0.009 indicates
a poor regression. This scatterplot can be seen in Figure 6 in the appendix.
To capture an even higher level of resolution identical calculations were performed on three
months of ten minute data. The beta of this data set was calculated to be 0.29, and after ScholesWilliams adjustment rose to 0.32. Again, the regression is not significant.

Bitcoin vs S&P 500 10 Minute Returns 3 Months


8.0%

Bitcoin Returns

6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

S&P 500 Returns

1.0%

2.0%

3.0%

After the Dimson adjustment the beta was calculated to be 0.32, but the 2 is too low for significance.
The scatterplot is included here to illustrate how Dimson adjustments heavily impact temporally close
data points; it is rather remarkable how many of the S&P 500 returns approximate 0%.

Bitcoin vs S&P 500 Dimson


10 Minute Returns 3 Months

Bitcoin Adjusted Returns

40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

S&P500 Adjusted Returns

FTSE Global All Cap Index (VT)


The FTSE Global All Cap Index is a global index that covers approximately 7,400 securities.11 It
is tracked by the ETF VT, which was used for this analysis. The beta of bitcoin calculated on five years
of monthly data against VT was performed by calculating the covariance of bitcoin and VT returns and
dividing by the variance of VT returns. The calculated beta of 3.88 is rather high, but the 2 is low
indicating the regression is not a good descriptor of the underlying data.

10

Bitcoin vs VT Monthly Returns 5 Years


500%

Bitcoin Returns

400%
300%
200%
y = 3.8805x + 0.2708
R = 0.034

100%
0%
-100%
-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

VT Returns

Again the outliers are rather dramatic, and in November of 2013 bitcoin returned 451% while VT
returned 1.5%. Perhaps without the handful of data points that are outliers the result would be
significant, but removing inconvenient data points to achieve significance would not be advisable.
To capture a higher resolution, the same calculation was done on daily data for approximately 5
years. In order to compensate for asynchronous data, both the Sholes-Williams and Dimson betas were
calculated on this data set. The beta without adjustment was 0.32, and after Scholes-Williams
adjustment rose to 0.47. As seen in the scatterplot the actual returns seem to be randomly distributed,
and the low 2 of 0.002 indicates that the results are not significant.

11

Bitcoin vs VT Daily Returns 2010-2015


80.0%

Bitcoin Retuns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

VT Returns

After Dimson adjustment, the beta was calculated to be 0.22, however again the low 2 indicates that
the results are not significant. The scatterplot of Dimson adjusted returns for this data set can be found in
Figure 7 in the appendix.
To see previous results with less noise but still a significant amount of data, identical calculations
were performed on one year of daily data. The beta of this data set was found to be 0.36, and after
Scholes-Williams adjustment rose to 0.83. Again the scatterplot of returns indicates that the results are
not significant; this scatterplot can be seen in Figure 8 in the appendix. After Dimson adjustment the
beta was calculated to be 0.26, again with a low 2 of 0.008 indicating the results are not significant; the
scatterplot of these results can be found in Figure 9 in the appendix.
To capture an even higher level of resolution identical calculations were performed on three
months of ten minute data. The beta of this data set was calculated to be 0.31, and after ScholesWilliams adjustment rose to 0.34. The low 2 indicates that these results are not significant; the
scatterplot of returns can be found in Figure 10 in the appendix. After Dimson adjustment the beta was

12

calculated to be 0.28, with a low 2 of 0.002 indicating the results are not significant; the scatterplot of
these results can be found in Figure 11 in the appendix.
Bloomberg Dollar Spot Index (BBDXY)
The Bloomberg Dollar Spot Index tracks a basket of ten global currencies against the US
Dollar.8 The beta of bitcoin calculated on five years of monthly data against BBDXY was performed by
calculating the covariance of bitcoin and BBDXY returns and dividing by the variance of BBDXY
returns. The calculated beta of -7.01 is very low, but the 2 of 0.029 is low indicating the regression is
not a good descriptor of the underlying data.

Bitcoin vs BBDXY Monthly Returns 5 Years


500%

Bitcoin Return

400%
300%
200%
y = -7.0051x + 0.3132
R = 0.0291

100%
0%

-100%
-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Axis Title

To capture a higher resolution, the same calculation was done on daily data for approximately 5
years. In order to compensate for asynchronous data, both the Sholes-Williams and Dimson betas were
calculated on this data set. The beta without adjustment was -0.51, and after Scholes-Williams
adjustment fell to -0.89. As seen in the scatterplot the actual returns seem to be randomly distributed,
and the low 2 of 0.0008 indicates that the results are not significant.

13

Bitcoin vs BBDXY Daily Returns 2010-2015


80.0%

Bitcoin Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

BBDXY Returns

After Dimson adjustment, the beta was calculated to be -0.43, however again the low 2 of 0.006
indicates that the results are not significant. The scatterplot of Dimson adjusted returns for this data set
can be found in Figure 12 in the appendix.
To see previous results with less noise but still a significant amount of data, identical calculations
were performed on one year of daily data. The beta of this data set was found to be 0.10, and after
Scholes-Williams adjustment rose to 0.42. Again the scatterplot of returns indicates that the results are
not significant; this scatterplot can be seen in Figure 13 in the appendix. After Dimson adjustment the
beta was calculated to be 0.14, again with a low 2 of 0.0008 indicating the results are not significant;
the scatterplot of these results can be found in Figure 14 in the appendix.
To capture an even higher level of resolution identical calculations were performed on three
months of ten minute data. The beta of this data set was calculated to be 0.29, and after ScholesWilliams adjustment remained approximately the same at to 0.29. The low 2 indicates that these results
are not significant; the scatterplot of returns can be found in Figure 15 in the appendix. After Dimson
adjustment the beta was calculated to be 32.43, an extraordinary amount, but the low 2 of 0.0009

14

indicates the results are not significant. The scatterplot is included below to further highlight how
Dimson adjustment impacts temporally close data points, especially with a volatile asset like bitcoin. A
return of below 100% seems impossible, but remember that the Dimson adjustment amplifies returns on
assets with large returns that have temporally close data points.

Bitcoin vs BBDXY Dimson 10 Minute Returns 3 Months

Bitcoin Adjusted Returns

100%
50%
0%
-50%
-100%
-150%
-0.08%

-0.06%

-0.04%

-0.02%

0.00%

0.02%

0.04%

0.06%

BBDXY Adjusted Returns

Gold (XAU)
Gold is a commodity which historically has served as money. The beta of bitcoin calculated on
five years of monthly data against gold was performed by calculating the covariance of bitcoin and gold
returns and dividing by the variance of gold returns. The calculated beta of -0.04 is low, but the 2 of
approximately 0 is low indicating the regression is not a good descriptor of the underlying data.

15

Bitcoin vs Gold Monthly Returns 5 Years


500%

Bitcoin Returns

400%
300%
200%
y = -0.0382x + 0.2873
R = 6E-06

100%
0%
-100%
-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Gold Returns

To capture a higher resolution, the same calculation was done on daily data for approximately 5
years. In order to compensate for asynchronous data, both the Sholes-Williams and Dimson betas were
calculated on this data set. The beta without adjustment was -0.08, and after Scholes-Williams
adjustment rose to 1.03. As seen in the scatterplot the actual returns seem to be randomly distributed,
and the low 2 of 0.0001 indicates that the results are not significant.

Bitcoin vs Gold Daily Returns 2010-2015


80.0%

Bitcoin Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%

-60.0%
-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

Gold Returns

0.0%

2.0%

4.0%

6.0%

16

After Dimson adjustment, the beta was calculated to be -0.06, however again the low 2 of 0.006
indicates that the results are not significant. The scatterplot of Dimson adjusted returns for this data set
can be found in Figure 16 in the appendix.
To see previous results with less noise but still a significant amount of data, identical calculations
were performed on one year of daily data. The beta of this data set was found to be 0.24, and after
Scholes-Williams adjustment fell to 0.31. Again the scatterplot of returns indicates that the results are
not significant; this scatterplot can be seen in Figure 17 in the appendix. After Dimson adjustment the
beta was calculated to be -0.17, again with a low 2 of 0.004 indicating the results are not significant;
the scatterplot of these results can be found in Figure 18 in the appendix.
To capture an even higher level of resolution identical calculations were performed on three
months of ten minute data. The beta of this data set was calculated to be -0.12, and after ScholesWilliams adjustment fell slightly to -0.15. The low 2 indicates that these results are not significant; the
scatterplot of returns can be found in Figure 19 in the appendix. After Dimson adjustment the beta was
calculated to be -6.04, but the low 2 of 0.0003 indicates the results are not significant. The scatterplot
of Dimson adjusted returns for this data set can be found in Figure 20 in the appendix.
Bloomberg Commodity Index (BCOM)
The Bloomberg Commodity Index is a weighted average of twenty two exchange-traded futures
on physical commodities.9 The beta of bitcoin calculated on five years of monthly data against gold was
performed by calculating the covariance of bitcoin and gold returns and dividing by the variance of gold
returns. The calculated beta of 2.13 is high, but the 2 of 0.0134 is low indicating the regression is not a
good descriptor of the underlying data.

17

Bitcoin vs BCOM Monthly Returns 5 Years


500%

Bircoin Returns

400%
300%
200%
y = 2.1239x + 0.3018
R = 0.0134

100%
0%
-100%
-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

BCOM Returns

To capture a higher resolution, the same calculation was done on daily data for approximately 5
years. In order to compensate for asynchronous data, both the Sholes-Williams and Dimson betas were
calculated on this data set. The beta without adjustment was 0.30, and after Scholes-Williams
adjustment rose to 1.18. As seen in the scatterplot the actual returns seem to be randomly distributed,
and the low 2 of 0.0011 indicates that the results are not significant.

Bitcion vs BCOM Daily Returns 2010-2015


80.0%

Bitcoin Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0%

BCOM Returns

1.0%

2.0%

3.0%

4.0%

5.0%

18

After Dimson adjustment, the beta was calculated to be 0.19, however again the low 2 of 0.007
indicates that the results are not significant. The scatterplot of Dimson adjusted returns for this data set
can be found in Figure 21 in the appendix.
To see previous results with less noise but still a significant amount of data, identical calculations
were performed on one year of daily data. The beta of this data set was found to be 0.07, and after
Scholes-Williams adjustment rose to 0.42. Again the scatterplot of returns indicates that the results are
not significant; this scatterplot can be seen in Figure 22 in the appendix. After Dimson adjustment the
beta was calculated to be 0.05, again with a low 2 of 0.0006 indicating the results are not significant;
the scatterplot of these results can be found in Figure 23 in the appendix.
To capture an even higher level of resolution identical calculations were performed on three
months of ten minute data. The beta of this data set was calculated to be 0.09, and after ScholesWilliams adjustment rose slightly to 0.17. The low 2 indicates that these results are not significant; the
scatterplot of returns can be found in Figure 24 in the appendix. After Dimson adjustment the beta was
calculated to be 0.49, but the low 2 of 0.0007 indicates the results are not significant. The scatterplot
of Dimson adjusted returns for this data set can be found in Figure 25 in the appendix.

19

Summary of Results

Time
Five Years
Five Years
Five Years
One Year
One Year
Three
Months
Three
Months

Data Set and Calculation


XBT vs.
Resolution
Beta
SPX
VT
BBDXY
XAU
BCOM
Monthly Data
Beta
5.05
3.88
-7.01
-0.04
2.13
Daily Data
Scholes-Williams Beta
0.52
0.47
-0.89
1.03
1.18
Daily Data
Dimson Beta
0.24
0.22
-0.43
-0.06
0.19
Daily Data
Scholes-Williams Beta
1.07
0.83
0.42
0.31
0.42
Daily Data
Dimson Beta
0.28
0.26
0.14
-0.17
0.05
Ten Minute
Data
Scholes-Williams Beta
0.32
0.34
0.29
-0.15
0.17
Ten Minute
Data
Dimson Beta
0.32
0.28
32.43
-6.04
0.49

As we can see, all results were not statistically significant and no real consistent estimation of
beta can be made. For the purposes of the CAPM analysis, it seems that all bitcoin risk is idiosyncratic,
and it shares no systemic risk from the market portfolio. This is an interesting result because it means
that bitcoin offers new diversification for the investor trying to create a market portfolio. For the
purposes of contributing to the classification debate, it appears that bitcoin does not share significant
amounts of systemic risk with currencies, gold, or commodities more broadly. This perhaps slightly
supports the assertion that bitcoin represents a new class of asset, but that is up to the reader to decide
for themselves.

20

Appendix.
Figures 1 through 4 demonstrate the volatile nature of the price of bitcoin over time.

Bitcoin Price July 2010 to October 2015


$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$0.00
2010-07-19

2011-07-19

2012-07-19

2013-07-19

2014-07-19

Bitcoin Price January to October 2011


$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00

Bitcoin Price January to July 2013


$250.00
$200.00
$150.00
$100.00
$50.00
$0.00

2015-07-19

21

Bitcoin Price August 2013 to April 2014


$1,200.00
$1,000.00
$800.00
$600.00
$400.00
$200.00
$0.00

Figure 5 shows the scatterplot of five years of Dimson adjusted bitcoin returns against S&P 500 returns.
A trend line illustrating the regression is not shown as it is obvious both visually and from the low 2
that the data does not have a significant regression.

Bitcoin vs S&P 500 Daily


Dimson Returns 2010-2015
60.0%

Bitcoin Returns

40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
-14.0% -12.0% -10.0% -8.0%

-6.0%

-4.0%

-2.0%

S&P 500 Returns

0.0%

2.0%

4.0%

6.0%

8.0%

22

Figure 6 shows the scatterplot of one year of Dimson adjusted bitcoin returns against S&P 500 returns.
A trend line illustrating the regression is not shown as it is obvious both visually and from the low 2
that the data does not have a significant regression.

Bitcoin Adjusted Returns

Bitcoin vs S&P 500 Daily


Dimson Returns 2014-2015
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

S&P 500 Adjusted Returns

Figure 7 shows the scatterplot of five years of Dimson adjusted bitcoin returns against VT returns. A
trend line illustrating the regression is not shown as it is obvious both visually and from the low 2 that
the data does not have a significant regression.

Bitcoin vs VT Dimson Returns


by Day 2010-2015

Bitcoin Adjusted Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
-15.0%

-10.0%

-5.0%

0.0%

VT Adjusted Returns

5.0%

10.0%

23

Figure 8 shows the scatterplot of one year of daily returns of bitcoin against VT. A trend line illustrating
the regression is not shown as it is obvious both visually and from the low 2 that the data does not have
a significant regression.

Bitcoin vs VT Daily Returns 2014-2015


20.0%

15.0%

Bitcoin Returns

10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

VT Returns

Figure 9 shows the scatterplot of one year of Dimson adjusted daily returns of bitcoin against VT. A
trend line illustrating the regression is not shown as it is obvious both visually and from the low 2 that
the data does not have a significant regression.

Bitcoin Adjusted Returns

Bitcoin vs VT Dimson
Daily Returns 2014-2015
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-8.0%

-6.0%

-4.0%

-2.0%

VT Adjusted Returns

0.0%

2.0%

4.0%

24

Figure 10 shows the scatterplot of three months of ten minute returns of bitcoin against VT. A trend line
illustrating the regression is not shown as it is obvious both visually and from the low 2 that the data
does not have a significant regression.

Bitcoin vs VT 10 Minute Returns 3 Months


8.0%

Bitcoin Returns

6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

VT Returns

Figure 11 shows the scatterplot of three months of Dimson adjusted ten minute returns of bitcoin against
VT. A trend line illustrating the regression is not shown as it is obvious both visually and from the low
2 that the data does not have a significant regression. Note again how the Dimson adjustment impacts
temporally close data points.

Bitcoin vs VT Dimson 10 Minute Returns 3 Months

Bitcoin Adjusted Returns

40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

VT Adjusted Returns

0.00%

2.00%

4.00%

6.00%

25

Figure 12 shows the scatterplot of five years of daily returns of bitcoin against BBDXY. A trend line
illustrating the regression is not shown as it is obvious both visually and from the low 2 that the data
does not have a significant regression.

Bitcoin vs BBDXY Dimson


Daily Returns 2010-2015

Bitcoin Adjusted Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

BBDXY Adjusted Returns

Figure 13 shows the scatterplot of one year of daily returns of bitcoin against BBDXY. A trend line
illustrating the regression is not shown as it is obvious both visually and from the low 2 that the data
does not have a significant regression.

Bitcion vs BBDXY Daily Returns 2014-2015


20.0%
15.0%

Bitcoin Returns

10.0%
5.0%

0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

BBDXY Returns

0.0%

1.0%

2.0%

26

Figure 14 shows the scatterplot of one year of Dimson adjusted returns of bitcoin against BBDXY
returns. A trend line illustrating the regression is not shown as it is obvious both visually and from the
low 2 that the data does not have a significant regression.

Bitcoin Adjusted Returns

Bitcoin vs BBDXY Dimson


Daily Returns 2014-2015
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

BBDXY Adjusted Returns

Figure 15 shows the scatterplot of three months of bitcoin returns against BBDXY returns. A trend line
illustrating the regression is not shown as it is obvious both visually and from the low 2 that the data
does not have a significant regression.

Bitcoin vs BBDXY 10 Minute Returns 3 Months


8.0%
6.0%

Bitcoin Returns

4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-0.8%

-0.6%

-0.4%

-0.2%

0.0%

BBDXY Returns

0.2%

0.4%

0.6%

27

Figure 16 shows the scatterplot of five years of Dimson adjusted returns of bitcoin against gold. A trend
line illustrating the regression is not shown as it is obvious both visually and from the low 2 that the
data does not have a significant regression.

Bitcoin vs Gold Dimson


Daily Returns 2010-2015

Bitcoin Adjusted Returns

60.0%
40.0%
20.0%

0.0%
-20.0%
-40.0%
-60.0%
-80.0%
-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Gold Adjusted Returns

Figure 17 shows the scatterplot of one year of daily returns of bitcoin against gold. A trend line
illustrating the regression is not shown as it is obvious both visually and from the low 2 that the data
does not have a significant regression.

Bitcoin vs Gold Daily Returns 2014-2015


20.0%
15.0%

Bitcoin Returns

10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

Gold Returns

2.0%

3.0%

4.0%

5.0%

28

Figure 18 shows the scatterplot of one year of Dimson adjusted returns of bitcoin against gold. A trend
line illustrating the regression is not shown as it is obvious both visually and from the low 2 that the
data does not have a significant regression.

Bitcoin vs Gold Dimson


Daily Returns 2014-2015
20.0%

Bitcoin Adjusted Returns

15.0%

10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Gold Adjusted Returns

Figure 19 shows three months of ten minute returns of bitcoin against gold. A trend line illustrating the
regression is not shown as it is obvious both visually and from the low 2 that the data does not have a
significant regression.

Bitcoin vs Gold 10 Minute Returns 3 Months


8.0%
6.0%

Bitcoin Returns

4.0%
2.0%
0.0%
-2.0%
-4.0%

-6.0%
-8.0%
-10.0%
-0.6%

-0.4%

-0.2%

0.0%

0.2%

Gold Returns

0.4%

0.6%

0.8%

1.0%

29

Figure 20 shows three months of Dimson adjusted ten minute returns. A trend line illustrating the
regression is not shown as it is obvious both visually and from the low 2 that the data does not have a
significant regression. Note again how the Dimson adjustment impacts temporally close data points.

Bitcoin vs Gold Dimson 10 Minute Returns 3 Months

Bitcoin Adjusted Returns

100.00%
50.00%
0.00%
-50.00%
-100.00%
-150.00%
-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

Gold Adjusted Returns

Figure 21 shows five years of daily returns of bitcoin against BCOM. A trend line illustrating the
regression is not shown as it is obvious both visually and from the low 2 that the data does not have a
significant regression.

Bitcoin vs BCOM Dimson


Daily Returns 2010-2015

Bitcoin Adjusted Returns

60.0%
40.0%
20.0%
0.0%
-20.0%
-40.0%
-60.0%
-80.0%
-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

BCOM Adjusted Returns

2.0%

4.0%

6.0%

30

Figure 22 shows one year of daily returns of bitcoin against BCOM. A trend line illustrating the
regression is not shown as it is obvious both visually and from the low 2 that the data does not have a
significant regression.

Bitcoin vs BCOM Daily Returns 2014-2015


20.0%
15.0%

Bitcoin Returns

10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

BCOM Returns

Figure 23 shows one year of Dimson adjusted returns of bitcoin against BCOM. A trend line illustrating
the regression is not shown as it is obvious both visually and from the low 2 that the data does not have
a significant regression.

Bitcoin Adjusted Returns

Bitcoin vs BCOM Dimson


Daily Returns 2014-2015
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-6.0%

-4.0%

-2.0%

0.0%

2.0%

BCOM Adjusted Returns

4.0%

6.0%

31

Figure 24 shows three months of ten minute returns of bitcoin against BCOM. A trend line illustrating
the regression is not shown as it is obvious both visually and from the low 2 that the data does not have
a significant regression.

Bitcoin vs BCOM 10 Minute Returns 3 Months


6.0%

Bitcoin Returns

4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

BCOM Returns

Figure 25 shows three months of Dimson adjusted ten minute returns of bitcoin against BCOM. A trend
line illustrating the regression is not shown as it is obvious both visually and from the low 2 that the
data does not have a significant regression. Note again how the Dimson adjustment impacts temporally
close data points.

Bitcoin vs BCOM Dimson 10 Minute Returns 3 Months

Bitcoin Adjusted Returns

40.00%
30.00%
20.00%
10.00%
0.00%

-10.00%
-20.00%
-30.00%
-40.00%
-2.00%

-1.50%

-1.00%

-0.50%

BCOM Adjusted Returns

0.00%

0.50%

1.00%

32
Bibliography
1.
2.
3.
4.

https://bitcoin.org/bitcoin.pdf
https://www.fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html
http://www.cftc.gov/PressRoom/PressReleases/pr7231-15
http://arxiv.org/pdf/1402.4778.pdf

5. Roll, Richard (1977). A critique of the asset pricing theory's tests Part I: On past and

potential testability of the theory. Journal of Financial Economics, 4(2):129176.


6. Scholes, M. and Williams, J. (1977). Estimating betas from nonsynchronous data. Journal
of Financial Economics, 5:309327.
7. Dimson, E. (1979). Risk measurement when shares are subject to infrequent trading.
Journal of Financial Economics, 7:197226.
8. http://www.bloombergindexes.com/content/uploads/sites/3/2013/12/Dollar_Spot_Index_Fact_Sh

eetv2.pdf
9. http://www.bloombergindexes.com/content/uploads/sites/3/content/uploads/sites/3/2015/10/BCO
M-Fact-Sheet.pdf
10. http://ca.spindices.com/indices/equity/sp-500
11. http://www.ftse.com/products/indices/geis-series