Predicting market movement direction for bitcoin: A comparison of time series modeling methods. (January 2021)

• Record Type: Journal Article
• Authors: Ibrahim, Ahmed; Kashef, Rasha; Corrigan, Liam
• Is Part Of: Computers & electrical engineering. Volume 89(2021)
• Publication Date: 2021-01
• Subjects: Time-series -- Bitcoin -- Market movement -- Prediction models; Computer engineering -- Periodicals; Electrical engineering -- Periodicals; Electrical engineering -- Data processing -- Periodicals; Ordinateurs -- Conception et construction -- Périodiques; Électrotechnique -- Périodiques; Électrotechnique -- Informatique -- Périodiques; Computer engineering; Electrical engineering; Electrical engineering -- Data processing; Periodicals; Electronic journals; 621.302854
• DOI: 10.1016/j.compeleceng.2020.106905
• Languages: English
• ISSNs: 0045-7906

Abstract

Highlights: Several machine-learning models have been tested for this Up/Down binary-classification problem. A comparison of the state-of-art strategies in predicting the movement direction for bitcoin, including Random Guessing and a Momentum-Based Strategy is provided. The tested models include Autoregressive Integrated Moving Average (ARIMA), Prophet (by Facebook), Random Forest, Random Forest Lagged-Auto-Regression, and Multi-Layer Perceptron (MLP) Neural Networks. The MLP deep neural network has achieved the highest accuracy of 54% compared to other time-series prediction models. Various data transformation and feature engineering have been applied in the comparison are introduced. Abstract: Many traders participate in activities known as "day-trading", trading Bitcoin against the dollar bill as the United States Dollar (USD) on very short timeframes to squeeze out profits from small market fluctuations. This paper aims to help traders decide how to best act by creating a model that can predict price movement's direction for the next 5-min time frame. Several machine-learning models have been tested for this Up/Down binary-classification problem. In this paper, we provide a comparison of the state-of-art strategies in predicting the movement direction for bitcoin, including Random Guessing and a Momentum-Based Strategy. The tested models include Autoregressive Integrated Moving Average (ARIMA), Prophet (by Facebook), Random Forest, Random Forest Lagged-Auto-Regression, and Multi-Layer Perceptron (MLP) Neural Networks. The MLP deep neural network has achieved the highest accuracy of 54% compared to other time-series prediction models. Also, in this paper, various data transformation and feature engineering have been applied in the comparison.