Prediction of Cryptocurrency Price Dynamics with Multiple Machine Learning Techniques

Nowadays, encrypted digital currency offers a new way of secure trading and exchanging and has become increasingly important in our financial system. However, the temporal dynamics of cryptocurrencies is highly complex, and predictions are still challenging. In this study, we establish two prevailing machine learning models, fully-connected Artificial Neural Network (ANN) and the Long-Short-Term-Memory (LSTM), to predictively model the price of several popular cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Stellar Lumens (XLM), Litecoin (LTC), and Monero (XMR). We evaluate model performance and conduct sensitivity analysis to further understand our model behaviors. We find that although LSTM seems more appropriate for time sequence prediction task, ANN, in general, outrivals LSTM in our experiments. Using price information from other different cryptocurrencies for joint training and prediction could largely facilitate the prediction of BTC. Finally, the model predictive error is highly sensitive to the time scale of interest.