Using Machine Learning To Predict The Futures of Cryptocurrencies

As of today, many of our everyday activities are conducted virtually, for instance, attending class, working from home, even buying a car or house can be completed virtually. As we are shifting towards a world where we can do many significant things virtually, It has completely changed the way we think and conduct our everyday lives. Virtual currency has also made its mark in our lives. Debit/Credit cards being the first virtual currency has only paved the path for the future of virtual currency. That’s where Cryptocurrency comes in. A currency where it is not controlled by the federal authorities, A currency where the transactions can be untraced by its sophisticated encryption and the extreme volatility rate where Crypto can be used as an investment for the long term or a method of payment. Big tech companies such as Tesla, Microsoft and Rakuten to name a few, are starting to accept Cryptocurrencies as a means of payment. It is only driving the price of each crypto exponentially through the roof. We live in a world where our lives are powered by ML (Machine Leaning) Algorithms to help make our lives a bit easier. We have Virtual Assistants such as Alexa & Siri to help us plan our day, or we have Google Maps to helping us find a faster route when we’re getting late for a dinner reservation. What if I told you, we can use a specific algorithm that is so sophisticated, it can help us predict the future of Cryptocurrency and its prices. As a Computer/Software enthusiast I believe that Cryptocurrency and ML have a correlation that can help predict the future prices.

AI (Artificial Intelligence) & ML has already impacted our lives without us knowing about it. We’ll have a conversation with someone on text about a specific subject and after you open up either Tiktok or Instagram you’ll come across the exact subject that was talked about in your feed. The Power of ML & AI is relentless .With AI & ML, it has helped many Investment Bankers & Venture Capital Firms to predict whether a stock is on the rise or on the dip. This has also helped the general public understand future IPO’s and its worth. With Cryptocurrency now playing a big role in the investment world. Software companies are trying to come up with sophisticated algorithms that will help determine the futures of each Crypto. Behind every creative solution is a challenge that’s needs to overcome. The challenge being with Crypto is its high rate of volatility which makes it next to impossible to predict its future. But there is still a way to predict short term outcomes on each specific Cryptocurrency.

Many Data Scientists & Software Engineers like myself are able to create algorithms that can somewhat predict price, volume, open, high and low values based on a given dataset of each coin over a period of time. With the use of the code language Python, we can implement daily high/ lows of the specific coin over a certain period of time and set an instruction of splitting the data into two sets and testing 80% & 20% of the data respectively. With the implementation of price set in different currencies respectively, we must set up a specific architecture that takes in data and keeps track of specific data over certain time. The Architecture that is most commonly used is the LSTM architecture. The LSTM architecture lets the code keep track of the data which will be used to predict the outcome based on the data given. To keep track of the errors that could be made, we can use the Mean Absolute Error (MAE) formula to evaluate the numbers. MAE formula is used for measuring any errors in set of a prediction. With the use of MAE formula model, it can slightly help the code to predict the final outcome. With the help of LSTM neural network, we can certainly predict the short-term futures of Cryptocurrencies.

Bitcoin often comes into mind when the term Crypto is used. It has the highest market cap out of all the Crypto’s. If you were to buy couple Bitcoins back in 2012 when the price of each coin was around $12 USD. Your Investment Net worth would be well over 6 figures present day. No had ever predicted that Bitcoin would exponentially grow to the price where it is today. What made the price of the coin go up so high? It would be the growing adaption as a payment method. Many companies have started to accept it as payments. Tesla being the biggest, they accept Bitcoin from their customers as a method of Payment for its EV. Tech companies are starting to come up with specific trends which affect the volatility of Cryptocurrencies and are developing algorithms that can predict the price. Though the development has been restrictive due to its high volatility, security issues, political factor and internal competition. Tech Firms believe that eventually an algorithm can be created which takes upon all the factors being contributed into its volatility and predict its futures. A development of an algorithm this sophisticated will be revolutionizing for the tech world. It would be the start of a whole new generation where our futures can be solely predicted by an algorithm. Crypto with the highest Market Cap such as Bitcoin, Ethereum and Solana, would be easier to predict with the given data trend that is available. Every day we are seeing new types of crypto currency. They are either inspired by a popular TV show that has gone viral or a meme coin they want to compete against another meme coin. With all the new coins coming in, it makes it harder to predict the futures. Coins such as Doge and Shiba Inu are prime examples, no one ever saw the expectational market cap growth of those meme coins. With the endorsement of Tesla’s CEO Elon Musk, doge coin saw a rise of 9,800% over the past year. While Shiba’s rise was never forecasted to its 74,000,000% increase over the past year. This is just one example of how unpredictable Cryptos are compared to Stock indexes.

Within this generation, investing money has rapidly increased. People would rather put in their savings in the Stock or Crypto market than buy a house or property or many people are willing to quit their jobs to Day Trade where majority feel there is a possibility of earning more money. With the high volatility within the Crypto market, many have found a way to possibly earn even more money than in the stock market in a short period of time. With platforms providing trading Cryptocurrency easier than ever before, hence it is one of the reasons why Cryptocurrency is gaining so much popularity in such a short period of time.

As an involved Investor in the world of Cryptocurrency & my career being in Tech, I strongly believe that we will be using cryptocurrency as a means of payment every day and that there will be an algorithm that will help us predict long term futures of Crypto which would revolutionize the industry and the economy for the better.

Source: https://medium.com/@pratyushdutta29/using-machine-learning-to-predict-the-futures-of-cryptocurrencies-dafb3f823adb?source=rss——cryptocurrency-5