Forecasting of Bitcoin Illiquidity Using High-Dimensional and Textual Features

Liquidity is the ease of converting an asset (physical/digital) into cash or another asset without loss and is shown by the relationship between the time scale and the price scale of an investment. This article examines the illiquidity of Bitcoin (BTC). Bitcoin hash rate information was collected at three different time intervals; parallel to these data, textual information related to these intervals was collected from Twitter for each day. Due to the regression nature of illiquidity prediction, approaches based on recurrent networks were suggested. Seven approaches: ANN, SVM, SANN, LSTM, Simple RNN, GRU, and IndRNN, were tested on these data. To evaluate these approaches, three evaluation methods were used: random split (paper), random split (run) and linear split (run). The research results indicate that the IndRNN approach provided better results.Peer Reviewe

Assessment of Bitcoin carbon footprint

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Cascading Machine Learning to Attack Bitcoin Anonymity

Bitcoin is a decentralized, pseudonymous cryptocurrency that is one of the most used digital assets to date. Its unregulated nature and inherent anonymity of users have led to a dramatic increase in its use for illicit activities. This calls for the development of novel methods capable of characterizing different entities in the Bitcoin network. In this paper, a method to attack Bitcoin anonymity is presented, leveraging a novel cascading machine learning approach that requires only a few features directly extracted from Bitcoin blockchain data. Cascading, used to enrich entities information with data from previous classifications, led to considerably improved multi-class classification performance with excellent values of Precision close to 1.0 for each considered class. Final models were implemented and compared using different machine learning models and showed significantly higher accuracy compared to their baseline implementation. Our approach can contribute to the development of effective tools for Bitcoin entity characterization, which may assist in uncovering illegal activities.Comment: 15 pages,7 figures, 4 tables, presented in 2019 IEEE International Conference on Blockchain (Blockchain

Cryptocurrency Forecasting Models and DeFi

The nature of Cryptocurrency markets presents a challenge for Financial Time series forecasting, the regular use of time bars as a source of data to forecast can prove insufficient to predict the movements of the crypto token value. The use of additional data from DeFi sources can be used to create a more robust base in which to use different methods to perform better feature generation and feature selection to use for the prediction models. The use of the Three Barrier Method for labeling the movements of the data is suggested as a way to generate multiclass labeling in which both directions of the prices and magnitude are represented. The proposal of this work is that the use of DeFi data, the adapted use of the three-barrier method, and the use of Genetic Programming could create a dataset that has good predictor capabilities for the multiclass classification prediction of the movement and magnitude of the value of Bitcoin. In this work, a comparison between prediction models is performed using a combination of benchmark models, and the implementation of Random Forest and Multi-Layer Perceptron to construct a multiclass classifier for the price movement of the cross of Bitcoin and USDT from the Binance Exchange using historical data from Binance, Ethereum Blockchain, and symbolic data

Detecting Selfish Mining Attacks Against a Blockchain Using Machine Learing

Selfish mining is an attack against a blockchain where miners hide newly discovered blocks instead of publishing them to the rest of the network. Selfish mining has been a potential issue for blockchains since it was first discovered by Eyal and Sirer. It can be used by malicious miners to earn a disproportionate share of the mining rewards or in conjunction with other attacks to steal money from network users. Several of these attacks were launched in 2018, 2019, and 2020 with the attackers stealing as much as $18 Million. Developers made several different attempts to fix this issue, but the effectiveness of the fixes is currently unknown. Despite the known vulnerability, there is little researching into detecting these attacks either historically or in real-time. In this research, we build a program to gather data from known selfish mining attacks against the Ethereum Classic blockchain. We then use this data to train a machine-learning algorithm to discover the important features for detecting selfish mining

Algorithmic trading with cryptocurrencies

Since its inception in 2009, Bitcoin has gained popularity and importance in financial markets. The Bitcoin price is highly volatile entailing high risk and chances of high returns for traders. We define a holistic approach to build an intraday Bitcoin trading algorithm based on predictive analysis of ML models. The results show that our trading algorithm generates positive returns and to outperform its benchmark strategies after considerations for feasibility and profitability

Anomaly Detection In Blockchain

Anomaly detection has been a well-studied area for a long time. Its applications in the financial sector have aided in identifying suspicious activities of hackers. However, with the advancements in the financial domain such as blockchain and artificial intelligence, it is more challenging to deceive financial systems. Despite these technological advancements many fraudulent cases have still emerged. Many artificial intelligence techniques have been proposed to deal with the anomaly detection problem; some results appear to be considerably assuring, but there is no explicit superior solution. This thesis leaps to bridge the gap between artificial intelligence and blockchain by pursuing various anomaly detection techniques on transactional network data of a public financial blockchain named 'Bitcoin'. This thesis also presents an overview of the blockchain technology and its application in the financial sector in light of anomaly detection. Furthermore, it extracts the transactional data of bitcoin blockchain and analyses for malicious transactions using unsupervised machine learning techniques. A range of algorithms such as isolation forest, histogram based outlier detection (HBOS), cluster based local outlier factor (CBLOF), principal component analysis (PCA), K-means, deep autoencoder networks and ensemble method are evaluated and compared

Investigating the Predictability of a Chaotic Time-Series Data using Reservoir Computing, Deep-Learning and Machine- Learning on the Short-, Medium- and Long-Term Pricing of Bitcoin and Ethereum.

This study will investigate the predictability of a Chaotic time-series data using Reservoir computing (Echo State Network), Deep-Learning(LSTM) and Machine- Learning(Linear, Bayesian, ElasticNetCV , Random Forest, XGBoost Regression and a machine learning Neural Network) on the short (1-day out prediction), medium (5-day out prediction) and long-term (30-day out prediction) pricing of Bitcoin and Ethereum Using a range of machine learning tools, to perform feature selection by permutation importance to select technical indicators on the individual cryptocurrencies, to ensure the datasets are the best for predictions per cryptocurrency while reducing noise within the models. The predictability of these two chaotic time-series is then compared to evaluate the models to find the best fit model. The models are fine-tuned, with hyperparameters, design of the network within the LSTM and the reservoir size within the Echo State Network being adjusted to improve accuracy and speed. This research highlights the effect of the trends within the cryptocurrency and its effect on predictive models, these models will then be optimized with hyperparameter tuning, and be evaluated to compare the models across the two currencies. It is found that the datasets for each cryptocurrency are different, due to the different permutation importance, which does not affect the overall predictability of the models with the short and medium-term predictions having the same models being the top performers. This research confirms that the chaotic data although can have positive results for shortand medium-term prediction, for long-term prediction, technical analysis basedprediction is not sufficient

Algorithmic trading with cryptocurrencies - does twitter sentiment impact short-term price fluctuations in bitcoin

Since its inception in 2009, Bitcoin has gained popularity and importance in financial markets. The Bitcoin price is highly volatile entailing high risk and chances of high returns for traders. This work is part of a work project, which performs a holistic approach to build an intra day Bitcoin trading algorithm based on predictive analysis of Machine Learning models. This part performs a Sentiment Analysis on Twitter data, showing a Granger causal relationship between the extracted Sentiment and the Bitcoin price