Index Terms — Cryptocurrency, Bitcoin, Bitcoin Stock Market Prediction, Stock Market
Cryptocurrency has been around for several years and has now become quite popular, widespread, and also surrounded and there is a lot of controversy from innovative developments. Cryptocurrencies are digital currencies where transactions can be done by online transactions, unlike the common currency, cryptocurrency is designed based on cryptography.
Bitcoin is one kind of Cryptocurrency with no regulation from any party and is decentralized. and now is one type of investment in the stock market and bitcoin also. The one of unique characteristics of Bitcoin is daily price fluctuations which always change every day.
The value Bitcoin Exchange rate to (USD) is $3868 USD in march 2019 in the yahoo finance stock market. The Stock markets are influenced by many uncertain factors such as political issues, the economical issue at impact to local or global levels. To interpret key success factors for providing accurate predictions is complicated work as we mentioned before this.
For the market, we can analyze with many techniques such as technical indicators, price movements, and market technical analysis. To solve the problem above, there’s a need for a tool for prediction to help investors decide on bitcoin or other cryptocurrency market investments. Nowadays automation tools are usually used in common stock market predictions, and we can do the same work and strategy on this domain of cryptocurrencies. This paper studies bitcoin and stock market predictions, methods, techniques, and tools from a big number of resources paper, and other available sources.
- Cryptocurrency and Bitcoin
The history of cryptocurrency (Cryptographic currency) begins in the 1980s starting with David Chaum, his paper on cryptographic primitives of blind signatures. In his paper, he proposed a novel cryptographic scheme to blind the content of a message before it is signed, so that the signer cannot determine the content. These blind signatures can be publicly verified just like a regular digital signature. Chaum proposed a digital cash approach in such a way that is untraceable by another party.
The rise of cryptocurrency started on B-money In 1998, Wei Dai proposed b-money, an anonymous and distributed electronic cash system, In that method, describes two protocols based on a network that cannot be traced, where senders and receivers are identified only by digital such as their public keys, and each message will be signed by its sender to receiver.
Bit Gold In 1998, Nick Szabo propose models a new digital currency, the models based on cryptographic system puzzles, which after being solved, were sent to Byzantine fault-tolerant public registry and assigned to the public key of the solver.
Hashcash proposed by Adam Back, Haschash, a system that relied on a cryptographic hash function to derive a probabilistic proof of computational work as authentification system Pow (Proof of work)
And the last is RPOW Hal Finney’s proposed currency system based on a reusable proof of work (RPOW) in 2004
Between 2008 and 2009, Bitcoin was made the firsas the first decentralized cryptocurrency by Satoshi Nakamoto. Nakamoto published the Bitcoin whitepaper in 2008
and after January 3rd, 2009, the genesis block of the bitcoin protocol was created. Nowadays it is the most successful cryptocurrency in terms of market capitalization, beside above 700 altcoins that circulated in the world (eg. Litcoin, Ethereum) based on Bitcoin have been proposed since the launch of Bitcoin.
- Stock Market Investment
terms of market capitalization, besides above 700 altcoins that circulated in the world (eg. Litecoin, Ethereum) based on Bitcoin have been proposed since the launch of Bitcoin. B. Stock Market Investment The Growth of cryptocurrencies increases interest in the study of economic dynamics and financial characteristics. Bitcoin data transaction is available from several online sources including Coindesk, Datastream, yahoo finance, google finance Blockchain.info and any other common or local stock exchange.
In Indonesia, they have Indodax that provides transaction data of bitcoin, in Malaysia, they have local bitcoin and remitano both of them based on local currency exchange. Tae Kyun Klee et al. 2019 in the paper, describes about four levels of strategies of investments such as: From perspectives macro to micros, such as security selection, asset allocation, regional allocation, and country selection, and. Between these strategies, the first two strategies commonly apply for global stock investment.
Because the stock market accounts for the majority of the risk assets, stock market predictions are very important. However, betting on the direction of stock markets is considered a high-risk strategy because there are too many external factors that influence it.
- Overview of Bitcoin Predictions
The Bitcoin value is just like a common currency on the stock market although different. In any case, the indicators that affect bitcoin are different from the common stock exchange, because it is decentralized and not regulated by any party. But it is important to predict the value of Bitcoin for investors to make decisions for correct investment.
The Price of Bitcoin also does not depend on the business issue of interventing by the government unlike the common stock market because it’s not dependent on any party. To predict value we can use machine learning technology to predict the price of bitcoin.
- Bitcoin Predictions Methods, Technique, and Tools
There are many people doing research about the prediction of cryptocurrency. Greaves et al. has proposed a technique using Logistic Regression and SVM and analyzed using Graph to predict the price of bitcoin. Huisu Jang et al. they concern about a study on modeling and predicting bitcoin with Bayesian Neural Network and giving some knowledge about bitcoin. Edwin sin et al. provide the topic Bitcoin price prediction using Ensemble of Neural. Networks. Arief Radityo et al. proposed a prediction of bitcoin using the Artificial Neural Network Technique. They combine with market technical indicators but the results are worse of performance and training time. Sean et al propose a method for the price of Bitcoin using RNN and combine Using Recurrent Neural Network and Long Short Term Memory and Ruchi Mittal et al is propose an Automated cryptocurrencies prices prediction using machine learning technique based on historical trend (daily trend). The above research proposed various methods to predict bitcoin. However, there are some shortcomings: Most of the studies do not analyze on-trend just on price, not on the signal trend in the market. Some of the results it’s not provided to investors or traders to analyze the market. In this paper, we analyze and study of knowledge about bitcoin, stock market, and method, technique, and tools to predict Bitcoin from many papers, the internet, and any other source.
- AN ANALYSIS OF BITCOIN STOCK MARKET (BSM) PREDICTION
Technically Bitcoin stock market prediction it’s the same as the prediction technique on the common stock exchange but in the other way, when you try another technique and strategy like sentiment analysis maybe we can’t get different results or the strategy does not work. Because beside many factors that impact stock exchange prediction, Bitcoin it’s decentralized and not regulated by any party so it’s different from common currency or the common stock market.
We can use the same algorithm for Bitcoin prediction using Machine Learning (eq. SVM, Naïve Bayes, Regression) or any other Advance Machine learning technique to improve the results like Deep Learning using Neural networks (eq. ANN and RNN)
On Prediction, we can predict Bitcoin using techniques on a specific subject that we wanted. For example, we want to predict only by the signal or the price, or we can predict just for the current day or next day close value based on Long Short Term Memory (LSTM), historical price, and other technique like regime prediction to detect current day’s trend on market, to help the investor to make the decision to invest.
BSM Methods and Techniques
To make more accurate and enrich the result we can combine the prediction algorithm with another method or technique on predicting Bitcoin
In this section, we describe some of the techniques mentioned in previous research on some papers.
Market technical analysis is a method that studies price movements by looking at historical price data that occur in the market through media charts. By studying this historical data a conclusion can be drawn for making investment decisions in the market.
There are several reasons why we should use TA, the first, not necessarily fundamental analysis can be applied in trading. I do not say Fundamental is not important, but here that needs to be underlined fundamental analysis will be far more important if our position as an Investor where the investment period can take more than one year.
Secondly, with the media chart, it will be seen how the journey of a stock price where it is very helpful for traders to analyze in anticipation of future price changes and see patterns of patterns that occur in the price movements of a stock, so traders do not trade in ‘ darkness or without clear direction.
Another technique to interpret trends is Technical Indicator is a series of data points obtained by applying the formula to securities price of data. The combinations of price
data, such as close, low, high, low and open can be used as data point certain period of time. Some indicators can only be use on opening or closing prices, The price data is entered into the formula and a data point is produced. For Example, the average of 3 closing prices is one data point ((35200+25300+27550)/3=29350).