Machine Learning the Cryptocurrency Market

20 Pages Posted: 11 Jun 2018

See all articles by Laura Alessandretti

Laura Alessandretti

City University London, School of Engineering and Mathematical Sciences

Abeer ElBahrawy

City University London, School of Engineering and Mathematical Sciences; The Alan Turing Institute

Luca Maria Aiello

Nokia Bell Labs

Andrea Baronchelli

City University London - School of Engineering and Mathematical Sciences; City University London

Date Written: May 23, 2018

Abstract

Machine learning and AI-assisted trading have attracted growing interest for the past few years. Here, we use this approach to test the hypothesis that the inefficiency of the cryptocurrency market can be exploited to generate abnormal profits. We analyse daily data for 1,681 cryptocurrencies for the period between Nov. 2015 and Apr. 2018. We show that simple trading strategies assisted by state-of-the-art machine learning algorithms outperform standard benchmarks. Our results show that non-trivial, but ultimately simple, algorithmic mechanisms can help anticipate the short-term evolution of the cryptocurrency market.

Keywords: Bitcoin, Cryptocurrency Market, Machine Learning

JEL Classification: C00, C1, E26, E42, E51, F24, J33, O17

Suggested Citation

Alessandretti, Laura and ElBahrawy, Abeer and Aiello, Luca Maria and Baronchelli, Andrea, Machine Learning the Cryptocurrency Market (May 23, 2018). Available at SSRN: https://ssrn.com/abstract=3183792 or http://dx.doi.org/10.2139/ssrn.3183792

Laura Alessandretti

City University London, School of Engineering and Mathematical Sciences ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

Abeer ElBahrawy

City University London, School of Engineering and Mathematical Sciences ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

The Alan Turing Institute ( email )

British Library, 96 Euston Road
London, NW12DB
United Kingdom

Luca Maria Aiello

Nokia Bell Labs ( email )

21 J J Thomson Avenue
Cambridge, CB3 0FA
United Kingdom

Andrea Baronchelli (Contact Author)

City University London - School of Engineering and Mathematical Sciences ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

City University London ( email )

Northampton Square
London, EC1V OHB
United Kingdom

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