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How These Data Science Trends is Directly Affecting the Cryptocurrency Market

Feb 11, 2018 Posted /  6688 Views

How These Data Science Trends is Directly Affecting the Cryptocurrency Market

Cryptocurrency became an important commodity when it became possible to invest in cryptocurrencies. This aspect turned cryptocurrencies from being merely fancy computer codes written by some futurist dreamer into a real life investment asset. These Days it’s very uncommon to find an internet user who has a zero clue about cryptocurrencies ot the blockchain technologies. Cryptocurrency has a big market capitalization and is responsible for more than $2 billions in daily trades.

Just like in all trading markets some people (traders) believe that they have mastered the trading skills over time and develop solutions usually softwares and tips that can help you maximize your trading profits. However their secret trading formulas are always not distributed over the internet free of charge. Blogs, twitter and facebook accounts, youtube are just some of the marketing tools these people use to reach their clients. Majority of these crypto investment analyst use highly speculative models that are not necessarily based on numbers or statistics. There is a growing trend most especially within the cryptocurrency community that is harmonizing to develop a scientific approach to to creating a cryptocurrency investment tool.

How data Science Intersects with Blockchain and Crypto Investment

The blockchain technology and data science still remains some of the world’s most exciting technologies of all time with the ability of disrupting a lot of other traditional technologies. The tech community is ready for a new age of technological development powered by Artificial Intelligence (AI) and the internet of things for everything human uses. Both data science and blockchain technology play an active role if this new age of technological development is to ever be realized. Data science has been time and again used in Blockchain projects as a method to conceptualize certain things in cryptocurrencies.

The cryptocurrency market still remains one of the most volatile with a lot of speculative activities than any other markets. Price charts display a lot of peaks and troughs an indication of an unstable price environment. This is the reason why some investors have so far stayed away from investing in this market for a long time now. Cryptocurrency price analyst have started developing and deploying data driven approaches in order to harmonize the a lot of variations in the price of cryptocurrencies and make investment possible for every investors. Some of the most significant data driven approaches being used are listed below.

Bitcoin Price Prediction

The programing language python is playing a big role in the field of data Science, Big Data and Machine learning. Cryptocurrency analyst are using basic python scripts to develop algorithms that study the price of Bitcoin and predict future price movements. Being the most valuable cryptocurrency in the market, bitcoin is being used as a main focal point for crypto investment data analysis. The algorithm stores a large volume of historical bitcoin price data from numerous exchanges across the world and uses these data to predict future bitcoin prices.

The analyst however needs to be well versed with the programing language python in order to develop an effective tool. Having knowledge about the anaconda interface of python would significantly make the tool more effective, anaconda is the most popular large data handler embedded on python. With all the data collected and stored in a single data frame, the behavior of bitcoin is then studied with specialty algorithms once again. A probability based extrapolation is then used to predict future prices of bitcoin. The same approach showed positive results with ethereum and altcoins too.

Altcoin Price Correlation

There are more than 1,300 different altcoins currently in the cryptocurrency market, price correlation between these distinctive altcoins is another parameter that can be used while developing a cryptocurrency investment strategies. Price correlation in the relationship between the prices of two commodities being traded in the same market. Being a useful tool in predictive analysis, price correlation is frequently used in investment analysis. Price correlation tries to find the relationship between two assets by studying how the price of one of the asset changes in response to the other.

To Guarantee profits, investors always diversify their portfolio across a variety of different asset classes just like all the crypto coins being traded in the crypto market. With the entrance of large investment hedge funds into the cryptocurrency market, the level of speculation in the market just worsen causing prices to behave distinctively. With price correlation data, it is possible to sort which pairs of altcoins display similar price behaviors.

Current Capabilities of Data Driven Approaches

In conclusion data driven approaches to cryptocurrency investment is still not well developed to effective handle the cryptocurrency markets. A Lot of theories and models still require fine tuning in order to get any real results from these approach. Some programing parameters are seemingly distinct to cryptocurrencies only thus requiring more time to comprehend.

Currently the approaches being deployed for data analysis include Python-Anaconda Interface, Bayesian Regression, and Long Short Term Memory (LSTM) amongst others.


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Tags: Data Science cryptocurrency cryptomarket Live Bitcoin price

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