Research Papers on Bitcoin Pricing part 2

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  1. Deep Recurrent Modelling of Stationary Bitcoin Price Formation Using the Order Flow(arXiv)

Author : Ye-Sheen Lim, Denise Gorse

Abstract : In this paper we propose a deep recurrent model based on the order flow for the stationary modelling of the high-frequency directional prices movements. The order flow is the microsecond stream of orders arriving at the exchange, driving the formation of prices seen on the price chart of a stock or currency. To test the stationarity of our proposed model we train our model on data before the 2017 Bitcoin bubble period and test our model during and after the bubble. We show that without any retraining, the proposed model is temporally stable even as Bitcoin trading shifts into an extremely volatile “bubble trouble” period. The significance of the result is shown by benchmarking against existing state-of-the-art models in the literature for modelling price formation using deep learning.

2. Pricing Bitcoin Derivatives under Jump-Diffusion Models(arXiv)

Author : Pablo Olivares

Abstract : In recent years cryptocurrency trading has captured the attention of practitioners and academics. The volume of the exchange with standard currencies has known a dramatic increasing of late. This paper addresses to the need of models describing a bitcoin-US dollar exchange dynamic and their use to evaluate European option having bitcoin as underlying asset.

3.Using Networks and Partial Differential Equations to Predict Bitcoin Price(arXiv)

Author : Yufang Wang, Haiyan Wang

Abstract : Over the past decade, the blockchain technology and its Bitcoin cryptocurrency have received considerable attention. Bitcoin has experienced significant price swings in daily and long-term valuations. In this paper, we propose a partial differential equation (PDE) model on the bitcoin transaction network for predicting bitcoin price. Through analysis of bitcoin subgraphs or chainlets, the PDE model captures the influence of transaction patterns on bitcoin price over time and combines the effect of all chainlet clusters. In addition, Google Trends Index is incorporated to the PDE model to reflect the effect of bitcoin market sentiment. The experiment shows that the average accuracy of daily bitcoin price prediction is 0.82 for 362 consecutive days in 2017. The results demonstrate the PDE model is capable of predicting bitcoin price. The paper is the first attempt to apply a PDE model to the bitcoin transaction network for predicting bitcoin price.

4.A Gated Recurrent Unit Approach to Bitcoin Price Prediction(arXiv)

Author : Aniruddha Dutta, Saket Kumar, Meheli Basu

Abstract : In today’s era of big data, deep learning and artificial intelligence have formed the backbone for cryptocurrency portfolio optimization. Researchers have investigated various state of the art machine learning models to predict Bitcoin price and volatility. Machine learning models like recurrent neural network (RNN) and long short-term memory (LSTM) have been shown to perform better than traditional time series models in cryptocurrency price prediction. However, very few studies have applied sequence models with robust feature engineering to predict future pricing. in this study, we investigate a framework with a set of advanced machine learning methods with a fixed set of exogenous and endogenous factors to predict daily Bitcoin prices. We study and compare different approaches using the root mean squared error (RMSE). Experimental results show that gated recurring unit (GRU) model with recurrent dropout performs better better than popular existing models. We also show that simple trading strategies, when implemented with our proposed GRU model and with proper learning, can lead to financial gain.