Bitcoin was created by Satoshi Nakamoto in 2008 and released as open-source software in 2009. Subsequently, hundreds of cryptocurrencies have been developed over the years, but none have matched the growth, market capitalization, and price of Bitcoin.
The coin does not come under the control of central banks, governments, regulatory bodies, or third-party institutions such as banks. Each transaction is verified and stored in the Blockchain. The coin is created by miners who get rewards and incentives with Bitcoins after verification of each block. Every 210,000 blocks or four years, whichever is lower, the number of Bitcoins that can be brought into circulation is halved, and the rewards to miners decrease by 50%. This process will continue till the pre-decided cap of 21 million coins will be reached.
As per the demand and supply rules, lowering the supply increases the price of a commodity, which is the case with Bitcoin too. When demand stays the same, this halving increases the price of Bitcoin every time. The next halving is due in 2024, with an expected corresponding rise in the crypto price.
Ways to Predict the Bitcoin Price
Bitcoin is a highly volatile asset, and predicting its future price movements is not easy. There have been many sharp ups and downs in recent years, with the crypto’s value dropping by half in Jan 2018, only to recover in mid-2019 dramatically. In early 2020, it capped out at $10,000 after reaching a low of $5,000. During the year of economic recession, 2020, due to the Covid-19 pandemic, Bitcoin value held its ground, and at the end of 2020, the coin was trading at a high of $30,000 as per Bitcoin Pro – an automated crypto exchange.
Despite its volatility, over time, investors and technical experts have tried to predict the future price of Bitcoin with some degree of success. It is based on a couple of time-series models and is optimized to predict where the price of Bitcoin will be in the next few days or weeks. One model is Artificial Intelligence or Machine Learning, and the other is Deep Learning. Training and fitting the models with inputs is not a complicated job as it is done with the crypto’s historical price data. These two models will now be studied in some detail in this post.
Bitcoin Price Prediction by AI/Machine Learning
Over the last five years, attempts have been made to predict the price of Bitcoin through machine learning/Artificial Intelligence and an algorithm. One popular method is the Recurrent neural network, where connections of elements are in direct sequence, making it possible to process a series of events over sequential spatial chains. The other is the Long Short Term Memory Model (LSTM), where a recurrent neural network is used to understand and analyze long-term data sequences. It is like human beings utilizing what has happened to forecast what will happen in the future.
Initial attempts in 2017 by Ognjen, a Serbian entrepreneur, and in 2019 by Marco Santos, an American developer of machine learning, failed to create an AI-based model. However, Frederic Riveroll, an American entrepreneur, met with some success in 2020 to develop an AI-based model. The main USP of his work was that his neural network analyzed not only historical data but also news headlines. Frederic matched Bitcoin vs. USD and Fox Business News data by date and arrived at a chart that revealed a set pattern between keywords in news headlines and the Bitcoin prices. Based on these parameters, AI is used to predict the future price of Bitcoin.
Predict Bitcoin Prices with Deep Learning
Deep Learning is another method to predict the future price of Bitcoin. It is a subgroup of Machine Learning but with a key difference. Deep Learning uses neural networks where the machine can train itself, unlike AI, where the user has to enter variables to train the machine. In short, Deep Learning can work by itself and predict the future price of Bitcoin without any human interference.
To create the Deep Learning structure, it is first necessary to install the required libraries for creating a Neural Network. A CSV file with the historical price of Bitcoin has to be downloaded from any credible finance-based site. The data has to be processed so that the prices are in a Date-Time format with the “Close” prices. Once the neural network is set up, the future price of Bitcoin can be predicted by inputting the historical data.
Bitcoin Price Predictions for Upcoming Years
Here is what the professional investors have to say.
- Jeremy Liew, well-known investor – $500,000 by 2030
- Mike Novogratz – Former hedge fund manager – Market cap to exceed $7.5 trillion in ten years.
- Wences Casares, CEO of Xapo – $1, 000,000 by 2027
- Chamath Palihapitiya, founder of Social Capital – $100,000 by 2025
In a nutshell, the only way for Bitcoin prices in the future is UP.
Bitcoin prices have been traditionally volatile, but with cutting-edge methods and technology, like AI and Deep Learning, predicting future prices with a certain degree of accuracy is possible.