In the spirit of responsible data science, I think this article should be called something along the lines of "Attempting to predict bitcoin prices with ML -- can it be done?", with a section at the end dedicated to why the answer is a big "no". Similar story for predicting Dogecoin or stock prices.

Equity pricing is one of those use cases that simply doesn't suit ML. You're looking at prices that essentially operate as random walks. Thus you can't predict these prices based on its own values with any meaningful accuracy. This has been shown time and time again, even with neural networks incorporating additional technical indicators (e.g. RSI, MACD, etc).

Bitcoin (and other crypto assets) fair even worse--they're highly susceptible to black swan events. Take the dip last week that saw BTC prices flash dump to $51k. This was caused by a suddenly cascade of a record amount of retail liquidations (1 million people that swiped $300b off the crypto market cap!), combined with the sudden news of impending US regulations, alongside weird hash rate issues coming out of China. These are random black swan events on top of a random walk.

Another issue with crypto is its speculative nature--how do you properly value, say bitcoin? Some approaches focus on its scarcity and current circulating volume, while others focus on BTC's network effect or the current deviation away from BTC's S2F trajectory. Nothing concrete, though, unlike the stock market, where many stocks--particularly blue-chip non-growth companies--can be valued using standard discounted cashflow approaches. What I'm getting at is crypto ends up being an asset class that adheres even less to the Efficient Market Hypothesis, meaning you'd need even more external data to make any sort of accurate prediction. (Many people already don't believe the hypothesis holds for the stock market!)

In short, there's a reason why ML articles on equity pricing are centred around attempting some novel technique, before addressing why it doesn't work. Be very careful giving off an impression that you've found a magic formula!


I write about data science, modelling and investing. I shoot short films on the weekends. Always learning.

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