price of Bitcoin

: The Flight to Returns (20 Points)
Graphing (6 Points).
Value flows to its highest return. Recreate the four Data Dashboard graphs relating the yield spread one
year ago compared to the S&P500 and the price of Bitcoin (remember to use the logs). Add two graphs
to this dashboard for the Case Shiller Home Price Index (tag CSUSHPINSA) and its correlation to the yield
spread from one year ago and the reserve spread from the current quarter. These graphs are valuable at
3 points each.
Analysis (14 Points).
True or False (2 points):
As the yield spread begins to increase, we can expect the value of home prices as measured by the Case
Shiller Home Price Index to fall.
True or False (2 points):
Homes are not a monetary asset in that they are not liquid (closing costs… ouch), however they can
provide financial service like speculation and store of value.
Essay (10 points): Recall from the data dashboards that the yield spread is the difference in return on a
10 year bond and a much shorter bond or lending rate such as the overnight Federal Funds Rate. This is
an attempt to capture the cost to holding the “store of value service” in monetary or financial assets.
The Reserve Spread is an attempt to measure the immediate opportunity cost of holding a liquid asset
like currency or reserves by banks instead of lending.
Explain in between 600 to 1000 words why cryptocurrency would be behaving less like cash and more
like equities and property. Take 200 or so words and provide a prediction for housing prices, the S&P
500, and Bitcoin price in Quarter 3 of 2021. (Hint: Use those trendline equations. Also… yikes). Appendix 1. Crime and the $100 Bill since 1995.
Year Value $100 to % GDP Fed Funds Rate Value Crime % GDP
1995 3.16% 5.8 0.17%
1996 3.24% 5.3 0.15%
1997 3.40% 5.5 0.13%
1998 3.53% 5.4 0.12%
1999 4.01% 5.0 0.10%
2000 3.68% 6.2 0.12%
2001 3.98% 3.9 0.13%
2002 4.19% 1.7 0.13%
2003 4.26% 1.1 0.12%
2004 4.23% 1.4 0.11%
2005 4.18% 3.2 0.10%
2006 4.08% 5.0 0.11%
2007 3.94% 5.0 0.10%
2008 4.25% 1.9 0.10%
2009 4.54% 0.2 0.09%
2010 4.70% 0.2 0.09%
2011 5.04% 0.1 0.09%
2012 5.33% 0.1 0.08%
2013 5.51% 0.1 0.09%
2014 5.79% 0.1 0.07%
2015 5.93% 0.1 0.07%
2016 6.16% 0.4 0.07%
2017 6.40% 1.0 0.07%
2018 6.52% 1.8 0.07%
2019 6.65% 2.2 0.06%
This data comes from FRED, the Federal Reserve Board Survey of Currency, and the FBI’s Uniform Crime
Data Reporting Tool. Feel free to ask me for further links if you want to dig into the data on your own.
Calculations t convert to % GDP use the nominal value of GDP for that year. Appendix 2. Crime and Crypto since 2010.
Year Bitcoin Value % GDP Value Crime % GDP Fed Funds Rate
2010 0.000010% 0.09% 0.18
2011 0.000268% 0.09% 0.1
2012 0.000889% 0.08% 0.14
2013 0.054305% 0.09% 0.11
2014 0.024631% 0.07% 0.09
2015 0.035378% 0.07% 0.13
2016 0.082612% 0.07% 0.4
2017 1.215886% 0.07% 1
2018 0.321098% 0.07% 1.83
2019 0.607126% 0.06% 2.16
This data comes from Coinbase and Quandl (total market capitalization of Bitcoin)and the FBI’s Uniform
Crime Data Reporting Tool. Feel free to ask me for further links if you want to dig into the data on your
own. Calculations t convert to % GDP use the nominal value of GDP for that year.