The intersection of traditional and digital assets has become a focal point of interest in the modern financial markets. This project aims to conduct a quantitative analysis to explore potential correlations and insights between Vanguard energy ETF and Bitcoin prices.
Our initial plan to conduct a quantitative analysis on Bitcoin and foreign exchange derivatives evolved into a more focused study on the correlation between Bitcoin ETF prices and Vanguard's 'VENAX' Energy ETF. This shift is driven by the unique connection both assets share with energy usage.
While specific safeguards have been implemented in the market with the approval of Bitcoin ETFs by the SEC as of January 10th, 2024, the decentralized nature and pronounced volatility of Bitcoin create uncertainty for both retail and institutional investors. Our analysis of Bitcoin prices and VENAX aims to offer clarity to investors seeking a hedge against the energy consumption associated with Bitcoin mining, utilizing a more stable asset tied to energy consumption. Although Bitcoin prices may experience downturns, conversely, potential profits can be realized through investments in Vanguard Energy ETF.
Our project focus stems from the evolving landscape of Bitcoin ETFs in the market, acknowledging the established regulatory framework while considering the unique challenges posed by Bitcoin's decentralized nature.
Our main objectives include:
- Conducting quantitative analysis on Bitcoin ETF prices and Vanguard's 'VENAX' Energy ETF.
- Exploring potential correlations and insights between these assets.
- Providing valuable insights for investors interested in the energy sector and cryptocurrency investments.
We will gather historical price data for Bitcoin ETFs and Vanguard's 'VENAX' Energy ETF, along with relevant market indicators.
Our analysis techniques will include:
Correlation Analysis:
- Analyze the correlation between Bitcoin derivatives and Vanguard energy ETF 'VENAX'. Understanding these relationships can provide insights into broader market dynamics.
- We will utilize Python libraries such as pandas, numpy, plotly, altair, matplotlib, seaborn, hvplot, and pathlib for data analysis and visualization.
- Streamlit for app deployment.
The trajectory of Bitcoin from its inception to the present has been marked by significant developments, underscoring its prominence in the digital asset realm. Commencing in 2009, the cryptocurrency has achieved noteworthy milestones, including its inaugural transaction in 2010 (involving 10,000 BTC, now valued in the millions). Subsequent remarkable milestones include the notable ascent to $1,000 in 2013, $10,000 in 2017, and an impressive surge to surpass $60,000 in 2021. A thorough examination of these key events enables a comprehensive understanding of the factors propelling interest in Bitcoin and the impact of external occurrences on its valuation. Moreover, the analysis encompasses an exploration of market trends, discerning the fluctuations that significantly influence Bitcoin's market behavior. Studying historical price movements facilitates the identification of patterns, periods of heightened volatility, and offers insights into potential future developments.
In the realm of technical analysis, we delve into the current market conditions and potential future price movements of Bitcoin using various indicators. Moving averages, such as the simple moving average (SMA) and exponential moving average (EMA), offer insights into trend directions and potential reversals. The Relative Strength Index (RSI) helps us assess whether an asset is overbought or oversold, aiding in identifying potential trend reversals. The Moving Average Convergence Divergence (MACD) is instrumental in gauging the strength of a trend and identifying potential trend changes. By applying these technical indicators to Bitcoin's price charts, we aim to provide a comprehensive analysis of the current market sentiment. This technical approach allows us to assess the probabilities of future price movements, facilitating informed decision-making for investors and traders navigating the dynamic landscape of the cryptocurrency market
Bitcoin's fundamental analysis hinges on its robust technological infrastructure. Built upon a decentralized and immutable blockchain, Bitcoin ensures transparent and secure transactions across a distributed network, fostering trust and resilience against fraud. Its deflationary algorithm, limiting the total supply to 21 million coins, establishes scarcity comparable to precious metals. Technological advancements, such as scalability solutions like the Lightning Network and ongoing privacy feature developments, play pivotal roles in shaping Bitcoin's evolving narrative. Understanding these technological foundations is crucial for a comprehensive assessment of Bitcoin's value, security, and utility in the broader financial landscape.
The fund employs a "passive management" or indexing investment approach to mirror the performance of the MSCI US Investable Market Energy 25/50 Index. This index comprises stocks of large, medium-size, and small U.S. companies in the energy sector, classified under the Global Industry Classification Standard (GICS).
The GICS sector includes companies primarily involved in either:
- Construction or provision of oil rigs, drilling equipment, and other energy-related services and equipment (e.g., seismic data collection).
- Exploration, production, marketing, refining, and/or transportation of oil and gas products.
The fund aims to replicate the target index by investing all or substantially all of its assets in the stocks constituting the index. Each stock is held in approximately the same proportion as its weighting in the index. In cases where full replication is not feasible, the fund may sample its target index by holding stocks that collectively approximate the index in key characteristics like price/earnings ratio, earnings growth, and dividend yield.
A sampling strategy is employed only when regulatory constraints or other considerations prevent the fund from fully replicating the index.
The Vanguard Energy Index Fund seeks to track the performance of a benchmark index that measures the investment return of energy stocks.
-Growth of a $10,000 investment : January 31, 2014— December 31, 2023 -$13,855 Fund as of 12/31/23 -$14,007 Benchmark as of 12/31/23