Returns and risk on Bitcoin: a volatility measurement by unit root test

Purpose - The major reason of performing this study is to examine volatility of the Bitcoin prices. As known, Bitcoin became more popular when its price movements changed radically. It has been increasing for years since the date of first issuance in 2010 and reached highest level in its history by testing 19,345 USD. Based on this price movement, risk and returns are taken together for making investment in Bitcoin since huge decreasing observed in respond to the these increases. Methodology - In this study, Bitcoin prices are analyzed monthly basis through the time series analysis. Data related to closing prices of Bitcoin are obtained from investing.com web site. We established analysis based on sample consist of Bitcoin prices for the period between 2016 and 2019. Augmented Dickey Fuller (ADF) and Phillips Perron (PP) unit root test is applied to find out whether series are stationary or not. Findings- According to test results, the series of Bitcoin prices are not stationary yet. Although different fluctuating degree can be seen by years, generally it can be stated that Bitcoin prices are still volatile. Conclusion- Based on findings, Bitcoin prices may still be considered as volatile instrument. Therefore, investors should be careful when they want to include this investment tool to the portfolio since it represents risky instrument properties.