Dynamic Bayesian Networks for Predicting Cryptocurrency Price Directions: Uncovering Causal Relationships

• URL: http://arxiv.org/abs/2306.08157v3
• Date: Mon, 28 Oct 2024 06:11:28 GMT
• Title: Dynamic Bayesian Networks for Predicting Cryptocurrency Price Directions: Uncovering Causal Relationships
• Authors: Rasoul Amirzadeh, Dhananjay Thiruvady, Asef Nazari, Mong Shan Ee,
• Abstract summary: Six popular cryptocurrencies, Bitcoin, Coin, Litecoin, Ripple, and Tether are studied in this work. We propose a dynamic Bayesian network (DBN)-based approach to uncover potential causal relationships among various features including social media data, traditional financial market factors, and technical indicators. The results show that while DBN performance varies across cryptocurrencies, some cryptocurrencies exhibiting higher predictive accuracy than others, the DBN significantly outperforms the baseline models.
• Score: 1.4356611205757077
• License:
• Abstract: Cryptocurrencies have gained popularity across various sectors, especially in finance and investment. Despite their growing popularity, cryptocurrencies can be a high-risk investment due to their price volatility. The inherent volatility in cryptocurrency prices, coupled with the effects of external global economic factors, makes predicting their price movements challenging. To address this challenge, we propose a dynamic Bayesian network (DBN)-based approach to uncover potential causal relationships among various features including social media data, traditional financial market factors, and technical indicators. Six popular cryptocurrencies, Bitcoin, Binance Coin, Ethereum, Litecoin, Ripple, and Tether are studied in this work. The proposed model's performance is compared to five baseline models of auto-regressive integrated moving average, support vector regression, long short-term memory, random forests, and support vector machines. The results show that while DBN performance varies across cryptocurrencies, with some cryptocurrencies exhibiting higher predictive accuracy than others, the DBN significantly outperforms the baseline models.

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