The limits of the possibilities of artificial intelligence (AI) are still far from known. This has yet to be proven through a study conducted by researchers from the Indraprastha Institute of Information Technology (IIIT) Delhi, who combined AI with traditional finance to predict crypto prices.
Make way for crypto oracle
This study was recently accepted by a recognized academic journal. Indeed, Elsevier Information Science confirms the effectiveness of the method developed by Delhi researchers for predicting cryptocurrency prices. This research work was made possible by PhD student Shalini Sharma and her supervisor Dr Angshul Majumdar.
The conventional art of predicting asset futures
There are generally two dominant pricing methods in financial markets. One is based on the conventional methods of the 1970s. It is the Baum-Welch probabilistic approach, which makes it possible to predict prices in financial markets, but also the uncertainty in the prediction.
However, this approach shows its limits in the face of cryptocurrencies, because information on the underlying events at the origin of price variations is unavailable. This is where the modern approach adds value.
Resting initthis approach is also called deep learning or deep learning. However, the latter does not require any basic knowledge or information. As a result, it still does not cover the variable of uncertainty related to cryptos.
Read future crypto prices like in a crystal ball
The observation prior to this study is that there were no custom methods integrating uncertainty for crypto price predictions.
Shalini Sharma and Angshul Majumdar took out their magic wand for a new approach. Indeed, this solves the problem of uncertainty of predictions associated with cryptos. From the available data, it cannot be bettered in terms of accuracy. Also, this approach beats all the latest methods available.
To better understand the method proposed by the Delhi researchers, it is necessary to clarify the notion of CVI. CVI is nothing but crypto volatility index. For this purpose, it takes the fluctuation of a crypto over time. For example, a stablecoin like DAI or USDC will have a lower index compared to cryptos like Dogecoin or Shiba Inu.
Thus, the uncertainty estimates obtained by the two researchers are related to the historical CVI values of available cryptos. Consequently, predictions made through this new method are effectively interpretable.
It is a real revolution offered by these two scientists. Indeed, the forecasting methods available prior to their studies were largely based on modeling conventional approaches to financial markets. However, cryptos, just like blockchain from where they derive, they emerge from established patterns. It is one more step in the digital revolution that AI offers us.
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As a finance professional, I consider blockchain a real revolution thanks to all its innovations that have a global impact. It is with passion that I participate in this new digital era through my articles.