Bitcoin News With SiliconANGLE

Big Data can be useful for predicting all kinds of stuff, like natural disasters, upcoming trends, the spread of diseases and more. Now, researchers at MIT’s Computer Science and Artificial Intelligence Laboratory and the Laboratory for Information and Decision Systems are using data analytics to predict fluctuations in the price of Bitcoin.

Principal investigator Devavrat Shah and recent graduate Kang Zhang have developed a machine learning algorithm based on a statistical technique called “Bayesian regression.”

The researchers collected price data points from all major Bitcoin exchanges every second for five months. This resulted in more than 200 million data points, which were used to train an algorithm, using the Bayesian regression technique, to automatically identify patterns and predict prices and know how to proceed in trading.

This algorithm allowed the researchers to predict the average price movement every two seconds, for the next ten seconds. The researchers used the data to know when to sell, buy or do nothing with their Bitcoins. The report explained that if the price movement was higher than a certain threshold, they bought Bitcoin; if lower than the opposite threshold, they sold; if the price movement was in-between, they did nothing. This resulted in 89 percent return on investment over the next 50 days.

“Can we explain the price variation in terms of factors related to the human world? We have not spent a lot of time doing that,” Shah says, before adding with a laugh, “But I can show you it works. Give me your money and I’d be happy to invest it for you.”

Bitcoin’s price is often described as volatile, if not totally unpredictable, and this reality has scared some potential investors. In the past weeks, the price of Bitcoin dropped below $300, and though it has already recovered, it caused some Bitcoin enthusiasts to be worried.

The algorithm that Shah and his team have created could be very valuable to those who want to invest big money in Bitcoins. Knowing when to sell, buy or do nothing with your Bitcoins is important, especially when you’re treating it as an investment.

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