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Predictive Analysis of Cryptocurrency using Machine Learning with Blockchain

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Article in Machine Learning · December 2020

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 Predictive Analysis of Cryptocurrency using
Machine Learning with Blockchain technology
Sudheer Palakurla
Department of Computing and Informatics
Bournemouth University
Bournemouth, England, United Kingdom.

Abstract: this information is depending upon the

Cryptocurrency is one of the fast-growing
[1]
digital money in the present world. In this
study, Predictive analysis of cryptocurrency
provides the right methodology for explicit
predictions of cryptocurrency markets helps
the investors to make the right investment
decisions to attain profits. Using Machine
Learning algorithms such as Bayesian neural
networks, supervised learning and random
forests will be able to analyse the price
fluctuations of the cryptocurrencies through
historical data managed by Blockchain
technology. This results in the high precision
rate of the prediction analysis of
cryptocurrency using Machine Learning
algorithms along with Blockchain technology.
third-party financial institutions which are
responsible for the theft or loss of security in
st
the information systems. Now in this 21
century, new digital currencies such as
cryptocurrencies are evaluating day by day
leaving behind the actual currency in the
[11]
world.
Based on the numerous numbers of
investors have an interest in purchasing of
these cryptocurrencies made a major impact
[1]
on the economy. In the next decade,
cryptocurrency will grow exponentially
higher in the market. Many cryptocurrencies
such as Bitcoin, Ethereum, Litecoin, Stellar,
Ripple and many more are presently growing
[2]
rapidly in the market.

For short term investment plans most of the

Keywords: Cryptocurrency, Supervised financial investors who are interested in
learning, Random forest, sentiment analysis, cryptocurrency would invest for their
Machine Learning, Blockchain Technology. benefits. Bitcoin is one of the popularly
known cryptocurrencies which is used for
Introduction: [7]
diversification purposes.

In the past decade, the banks recorded the
transactions using paper-based which are
now adapting to digital transactions for all
the financial assets such as bank deposits,
bonds or equities are digitally recorded. All
Cryptocurrencies are developed with
Blockchain technology which maintains all
the transfers in distributed ledger format
consists of records also known as blocks.
These blocks will record transactions of the
data, timestamps and previous transactions currencies such as cryptocurrencies are not
involved in the block which cannot be been managed by any government or central
altered later. Blockchain technology along bank depends mostly on the social media
with machine learning is now reliable and its trends, the prediction of prices are
[16]
increase in the present world is phenomenal. calculated.
Blockchain is one of the best technologies to
record the information of data which is In most of the papers, the bitcoin price
prediction in the cryptocurrency market is
impenetrable to manipulate. It made a big
[13] [14] [15]
difference in the invention and trading of calculated. References using the
cryptocurrency. With the use of Blockchain blockchain technology features to predict
technology along with machine learning the bitcoin price with the change of the
prices which results in success in most of the
algorithms made it easy for predictive and
cases. There is a record of 64% accuracy of
descriptive methods to identify the different [14]
patterns and its gains using the statistical the price prediction by Sin et al using
insights. Machine Learning is a subset of genetic algorithms within neural networks.
[15]
Artificial intelligence helps to train the data As per Jang et al. the mean average
[17] percentage error (MAPE) produces a
automatically by improvising algorithms.
regression value of 0.013 using Bayesian
The Sentimental analysis also plays a vital neural networks. Using LTSM neural
role in the predictions of the market. networks with an accuracy of 53% by
Converging of these two technologies, [13]
McNally et al. in a price change.
Blockchain and Machine Learning are
Collective classification models are used in
capable of analysing the data securely and [10]
predicting analysis of graphs
helps the predictive analysis of prices of
cryptocurrency. Problem and Solution:
The Market cap for cryptocurrency as of May Unstructured and bad data in the crypto-
2020 is $265.545 billion and Blockchain currency market provided from the internet
market by 2023 is estimated to reach up to
is mostly manipulated or inaccurate data.
[5]
23.3 billion. Around the globe, 40 million This helps for the fake and bot trading with
users are now using cryptocurrency. In which most of the cryptocurrency exchanges which
bitcoin, the popular known cryptocurrency are most often manipulated. As per the
gained 193,639.36% growth between 2012 bitwise, a report in March 2019, 95% of the
and 2020 with a record of online trades or exchanges are fake also includes
[5]
transactions about $6 billion daily. Coinmarketcap which is one of the popular
[4]
Related works: crypto data websites.

Cryptocurrency is a coin-based market which

The future price change in the prediction in
the market simulation where the digital is volatile in nature compared to the stock
[12]
market. It depends upon the people’s
sentiment regardless to the actual market
strategies. Using supervised learning, which
is one of the Machine Learning algorithms by
evaluating predictive analysis of the price
and movement of the cryptocurrencies. This
research main contribution is to investigate
two major questions:
i) Can machine learning algorithms
efficiently predict cryptocurrency
prices?
ii) Any proper validations for the
predictive analysis for the
cryptocurrency market?
Machine learning algorithms using
supervised learning, random forest
algorithms to analyse a large amount of data
using sentiment analysis. Also, Blockchain
technology is used to secure and store the
data for analysing by supervised machine
learning algorithm. By the process of
optimization, another limitation raises by its
parameters which are to be tested as the
priority of this research is to find out the
predictive memory analysis and historical
memory analysis.
Cryptocurrency is also criticized because of
its exchange rate volatility, another hand
because of its divisibility, resistance,
inflation, transparency and portability is also
[6]
praised. The actual prediction of
cryptocurrency is to be maintained securely
with reliable data resources using blockchain
technology and machine learning models to
give the most accurate report possible to
determine future prices of the
cryptocurrency market.
Methodology:
As per the stock market predictions Machine
Learning techniques plays a vital role in
generating successful prediction through its
analysis. These Machine Learning techniques
can be considered to predict cryptocurrency
[8]
prices.
Howbeit, the Machine Learning algorithm is
limited so far in the cryptocurrency market
with the analysis of bitcoin prices. These
algorithms such as supervised learning and
random forest will be able to analyse the
[8]
price fluctuations of the bitcoin.
Machine learning models are explicitly
known for pattern recognition and self-
learning the methodology which can analyse
the patterns in different ways by evolving
itself to perform appropriate actions to
propose the best predictions for the
cryptocurrency prices. But this can’t be able
to determine in some of the factors such as
psychological factors of human. The truth
behind the accuracy upon future the market
price is low as it is compared to the historical
models, psychic models and quantitative
models which are failed for trying with many
[3]
variables of the complex problems.
Using Machine Learning classification
algorithms along with linear/logistic
regression, support vendor machine and
random forests with the comparison of the
past data results in the predictability of the
cryptocurrency prices in the market.
Supervised learning algorithms are one of
the best techniques for predictive analysis.
Considering the past and present data helps
to estimate future prices. The previous data
records are used to analyse the market
capitalization and estimate future prices
using Machine learning with the help of
Blockchain technology. For stock market
predictions using machine learning
techniques helps to predict the
cryptocurrency prices by using random
forest.
Opinion mining is also known as sentiment
analysis, which is creating an opinion digitally
in various social networks. Social media
increase in the present society makes a
much difference in a person’s views upon
using the sentiment analysis. The opinion
may be based upon the positive and negative
impacts which can affect the trade whereas
the cryptocurrency trades might be
depending upon the public views and
opinions.
Supervised learning algorithm in machine
learning helps to detect the patterns of the
data-driven by the cryptocurrency market
for the predictive analysis and give various
algorithm methods to maintain the
explanatory data variables which are often
mentioned to data variables, statistical
approach and predictors to determine to fit
[11]
in the prediction model.
Random forest is one of the machine
learning algorithm method which is based on
decision trees. Both regression and
classification problems are applied, the
random forest can implement with a
hundred of decision trees to forecast the
predictions or the best results. Supervised
learning method needs extensive training,
whereas random forest collects the small
amount of datasets and provide quick
evaluations. Cross-correlations and multi-
collinearity doesn’t been considered by
random forest we use other methods to
[18]
determine the values.
A classification approach for the predictive
analysis of cryptocurrency is by random
forest algorithm based upon its prediction by
constructing the decision trees. By random
subspace method, it de-correlates the trees
[12]
by changing the bagging algorithm.
The prediction for the price changes for each
cryptocurrency is approximately showed 8%
[9]
of accuracy gaps. Few improvements
required for the precision of prediction
analysis for the accuracy rate.
There are different requirements for each
machine learning algorithm which always
looks for the best possible solution for the
problem given. As the prediction,
cryptocurrency gets an accurate price then
the investors are not much worried about
the volatility of cryptocurrencies. This
assumption can be better and bigger in the
market for the investors to the scope of
profit.
Conclusion:
The main aim of this research is to identify
the prediction methods where it is used to
investigate whether one can predict the
price fluctuations accurately. By this paper,
analysing the data using multiple Machine
Learning algorithms such as supervised
learning, the random forest along with
sentiment analysis can be possible in the
determination of predictive analysis of
cryptocurrency markets.
The machine learning algorithms applied for
the trading information, data results and
historic price data can be helped for the
predictive analysis of cryptocurrencies. The
Blockchain technologies are helped to secure
the data and more securely and with the use
of machine learning techniques derives the
prediction of cryptocurrencies in the future.
Further Work:
The implementation of the above research is
yet to be worked on the given proposed
solution. This research paves the way for
further work, by analysing the algorithm
leads to the improved results. In future,
additional data can be used for the
predictive analysis of cryptocurrency for the
precise price rate. Using machine learning
algorithms as given will improve the
prediction itself by learning the data
provided.
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