The relationship between Bitcoin price movements, the FED's policy interest rate, U.S. inflation rate, and the NASDAQ100 index

Crypto technology, through its blockchain infrastructure, offers a decentralized, secure, and transparent digital economy. This technology eliminates the need for intermediaries commonly seen in traditional financial systems, thereby reducing transaction costs and increasing transaction speed. The importance of crypto technology lies in its ability to initiate a new era in digital economy and financial transactions by providing a system that operates without central authority intervention, creating new opportunities and alternatives for many investors. As the first decentralized cryptocurrency, Bitcoin has distinguished itself with its ability to facilitate financial transactions on a global scale and has established itself as a significant investment asset in many economies. Its limited supply is seen as a mechanism for protection against inflation, earning it the title of "digital gold." These attributes position Bitcoin not only as a means of payment but also as a secure investment asset. The inclusion of Bitcoin among investment assets is significant as it offers an alternative store of value and a means for portfolio diversification, making it appealing to investors outside of traditional financial systems. The potential for cryptocurrencies to dominate the future financial system, the increasing use of smart contracts between parties, the recording of documents such as marriage certificates and property deeds through immutable blockchain methods, and the recording of central banks' currency issuance via blockchain demonstrate the broad range of applications this technology may have. In this context, it is anticipated that blockchain technology and cryptocurrencies could revolutionize not only the financial sector but also legal and administrative processes. This highlights the potential of cryptocurrencies and blockchain technology to create a more transparent, secure, and efficient world in the future. This thesis examines the blockchain system and cryptocurrencies, with a particular focus on Bitcoin. The objective of the study is to evaluate how Bitcoin's price movements, as a cryptocurrency, interact with other variables such as the FED policy rate, U.S. inflation, and the NASDAQ100 index. Analyzing the relationship between NASDAQ100 and Bitcoin is crucial for understanding Bitcoin's connection with global financial markets. Since the NASDAQ100 index represents technology-driven companies, examining Bitcoin's correlation with this index also highlights its ties to technology investments. In this study, an ARIMAX model was applied to the Bitcoin (BTC) time series, incorporating external variables such as the NASDAQ100 index, the FED policy rate, and U.S. inflation. The findings suggest a negative relationship between Bitcoin prices and both the NASDAQ100 index and inflation, while the FED policy rate exhibits a small yet positive effect on Bitcoin prices. The model demonstrated a reasonable fit, evidenced by low residual variance and the absence of significant autocorrelation in the residuals, with good performance in terms of root mean squared error (RMSE) and mean absolute error (MAE). However, the high mean absolute percentage error (MAPE) indicates that the significant volatility in BTC price movements makes percentage-based predictions more challenging. The Ljung-Box test confirmed that the model's residuals behave like white noise, indicating that the model successfully captures the underlying dynamics. Given Bitcoin's high volatility and the influence of external economic factors, the model's forecasts point to a moderate downward trend accompanied by increasing uncertainty over time.