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Predicting the Bitcoin's price using AI.
1Department of Management, Western Galilee Academic College, Acre, Israel.
Artificial Intelligence (AI) significantly boosted Bitcoin investment returns, outperforming Machine Learning (ML) and traditional strategies. AI adapts to market changes, showcasing its potential in cryptocurrency trading and portfolio management.
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Area of Science:
- Computational Finance
- Artificial Intelligence in Finance
- Cryptocurrency Market Analysis
Background:
- Bitcoin's price volatility presents challenges for traditional investment strategies.
- The increasing complexity of financial markets necessitates advanced analytical tools.
- Emerging asset classes like cryptocurrencies require novel approaches to prediction and strategy development.
Purpose of the Study:
- To investigate the efficacy of Artificial Intelligence (AI) and Machine Learning (ML) in predicting Bitcoin price movements.
- To develop and evaluate adaptive investment strategies based on AI and ML.
- To compare the performance of AI-driven strategies against ML-based and traditional Buy-and-Hold (B&H) approaches.
Main Methods:
- Analysis of Bitcoin performance data from January 2018 to January 2024.
- Development of an AI-driven strategy using an ensemble of neural networks.
- Incorporation of predictive analytics and technical indicators for dynamic market exposure adjustment.
Main Results:
- The AI-driven strategy achieved a total return of 1640.32%.
- This significantly outperformed the ML-based approach (304.77%) and the traditional B&H strategy (223.40%).
- The AI strategy demonstrated effective loss mitigation during downturns and gain maximization during favorable conditions.
Conclusions:
- AI holds transformative potential for financial markets, especially in volatile cryptocurrency trading.
- AI-driven strategies offer superior performance and adaptability compared to traditional methods.
- Advanced AI techniques provide deeper insights into market dynamics, impacting portfolio management and risk assessment.