Forecasting the Price of the Cryptocurrency Using Linear and Nonlinear Error Correction Model

A Neural Learning Approach for a Data-Driven Nonlinear Error Correction Model

A nonlinear error correction model (ECM) is developed to fit nonlinear relationships between the nonstationary time series in a cointegration relationship. Different from the previous parametric methods, this paper constructs a hybrid neural network to learn the nonlinear error correction model by combining a linear recurrent neural network with a multilayer BP network. The network learning algorithm is given by using the gradient descent method and error back propagation. Based on the principle of data-driven, all network parameters can be obtained through the network learning and training. The daily data of gold price and the US dollar index in 2021 were used to verify this proposed nonlinear ECM neural learning method and the results were compared by the likelihood ratio Chi-square test. Simulation results show that the proposed data-driven nonlinear error correction neural learning method can improve goodness of fit statistical significantly of complex nonlinear relationship between time series.

A Stacking Ensemble Deep Learning Model for Bitcoin Price Prediction Using Twitter Comments on Bitcoin

Cryptocurrencies can be considered as mathematical money. As the most famous cryptocurrency, the Bitcoin price forecasting model is one of the popular mathematical models in financial technology because of its large price fluctuations and complexity. This paper proposes a novel ensemble deep learning model to predict Bitcoin’s next 30 min prices by using price data, technical indicators and sentiment indexes, which integrates two kinds of neural networks, long short-term memory (LSTM) and gate recurrent unit (GRU), with stacking ensemble technique to improve the accuracy of decision. Because of the real-time updates of comments on social media, this paper uses social media texts instead of news websites as the source data of public opinion. It is processed by linguistic statistical method to form the sentiment indexes. Meanwhile, as a financial market forecasting model, the model selects the technical indicators as input as well. Real data from September 2017 to January 2021 is used to train and evaluate the model. The experimental results show that the near-real time prediction has a better performance, with a mean absolute error (MAE) 88.74% better than the daily prediction. The purpose of this work is to explain our solution and show that the ensemble method has better performance and can better help investors in making the right investment decision than other traditional models.