Noncausal autoregressive model in application to bitcoin/USD exchange rates

Abstract

This paper introduces a noncausal autoregressive process with Cauchy errors in application to the exchange rates of the Bitcoin electronic currency against the US Dollar. The dynamics of the daily Bitcoin/USD exchange rate series displays episodes of local trends, which can be modelled and interpreted as speculative bubbles. The bubbles may result from the speculative component in the on-line trading. The Bitcoin/USD exchange rates are modelled and predicted.