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Is Bitcoin Predictable? This AI Software Says It is

Is Bitcoin Predictable? This AI Software Says It is

Is the price of a cryptocurrency like bitcoin predictable?

That’s one of the fundamental questions Wall Street has about the new asset. How do you predict something that’s risen over 1500 percent since the start of the year? And how do you predict something that’s supposedly uncorrelated to every other market?

Well, according to one company, cryptocurrencies are correlated to other markets—30, to be exact—and are therefore predictable.

That’s according to VantagePoint, an artificial intelligence software utilizing deep learning neural networks to forecast next-day high and low prices on equities, commodities, and currencies. The platform added cryptocurrencies last week.

While there is a certain degree of unpredictability in the crypto market due to the sheer amount of emotional trading going on around it, VantagePoint Vice President Lane Mendelsohn said some of the digital currencies do actually have varying degrees of correlation with precious metals, tech-based U.S. Equities, U.S. retail equities, and certain ETFs.

“There is an element of what’s driving the cryptocurrency prices now which is emotion, obviously,” he said. “Greed, fear, and that kind of stuff can’t be predicted. But what’s really driving it is the impact that other markets have. What the stock market is doing does have an impact on bitcoin. What other currency prices are doing does have an impact on bitcoin. What’s happening to gold does have an impact on bitcoin.”

How exactly does it predict price?

Mendelsohn explained that it requires a more detailed analysis than just looking at a chart or computing a simple, linear correlation analysis. The global nature of today’s interconnected financial markets, including the new cryptocurrencies, means that all sorts of global data need to be analyzed, he said.

“VantagePoint’s AI engine does this. This is analysis that a human just couldn’t do. This technology is very global. We can get the data, we can feed it into our AI engine, and we can determine what other markets drive the price of bitcoin.”

That analysis yields the top 30 most influential markets. This lets the software make its forecasts, based on a non-linear ‘weight matrix’ that mathematically details the extent to which each of these 30 related markets impacts the target market.

“Market relationships are not stagnant. It’s not a one size fits all,” he said. “The 30 markets that drive bitcoin are not the exact same 30 markets that drive ethereum. Whatever the 30 markets are that drive bitcoin is today, those might not be the same that drive bitcoin three months from now.”

Mendelsohn said that the platform will offer forecasts up to three days out for bitcoin, litecoin, and ethereum. Those are the three cryptos he said the platform can meet or surpass a baseline 80 percent accuracy rate.

“Those other cryptocurrencies are newer, and the way the artificial intelligence works is it needs a lot of data,” he said. “If there’s not a lot of data to sift through, it may see a pattern but it may not see a pattern that holds true long term. But also some of those cryptocurrencies are somewhat manipulated. And if something is manipulated, it’s not really predictable.”

VantagePoint is an editorial partner of Benzinga


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