How data could predict the value of digital currencies

In the current economic climate, many people have been looking into alternative investment opportunities. Digital Currencies are a decentralised and use open source technology to trade between users all over the world.

Using social data to predict consumer behavior, or even the value of goods, is nothing new, and many investors have been looking to include social metrics into their trading algorithms. Various academic studies have also highlighted predictive qualities of social data in the equity markets. However, because there are so many factors involved in pricing most financial instruments, it can be extremely difficult to accurately predict how markets will change.

Bitcoin however has several characteristics which make it an ideal market for social data prediction:

  • The value of Bitcoins is determined on market demand, because the number of coins on the market is predictable and are not tied to any physical goods
  • Bitcoin is predominately traded by individuals rather than large institutions
  • Events that affect Bitcoin value are disseminated first and foremost on social media

Many economists like to speculate about the prices of stocks or other commodities but human predictions are not always reliable. The new type Big Data predictions are created by software that analyzes millions of transactions that have taken place over the past several years. The software uses a computational model called an artificial neural network to search through this immense data and find patterns in the rise and fall of prices.

Unfortunately, predictions can become less accurate when real-life events significantly affect the value of bitcoins. This is important to keep in mind if you are making decisions based on the data on this website.

What do you think? Can such data be used to predict digital currencies values?

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One thought on “How data could predict the value of digital currencies

  1. Edgar says:

    To make the market for digital currencies a regulated market, which is not, it would require Financial Regulators including US IRS to have access to all that data and whatever that implies.

    In addition digital money has always been there, do we really believe that the money available on a credit card is real?

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