Using artificial intelligence techniques and econometrics model for crypto-price prediction

Abstract

In today's financial landscape, individuals face challenges when it comes to determining the most effective investment strategies. Cryptocurrencies have emerged as a recent and enticing option for investment. This paper focuses on forecasting the price of Ethereum using two distinct methods: artificial intelligence (AI)-based methods like Genetic Algorithms (GA), and econometric models such as regression analysis and time series models. The study incorporates economic indicators such as Crude Oil Prices and the Federal Funds Effective Rate, as well as global indices like the Dow Jones Industrial Average and Standard and Poor's 500, as input variables for prediction. To achieve accurate predictions for Ethereum's price one day ahead, we develop a hybrid algorithm combining Genetic Algorithms (GA) and Artificial Neural Networks (ANN). Furthermore, regression analysis serves as an additional prediction tool. Additionally, we employ the Autoregressive Moving Average (ARMA) model to assess the relationships between variables (dependent and independent variables). To evaluate the performance of our chosen methods, we utilize daily historical data encompassing economic and global indices from the beginning of 2019 until the end of 2021. The results demonstrate the superiority of AI-based approaches over econometric methods in terms of predictability, as evidenced by lower loss functions and increased accuracy. Moreover, our findings suggest that the AI approach enhances computational speed while maintaining accuracy and minimizing errors.