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Author(s): Agbedeyi O. D., Maliki S. O., Asor V. E..

Volume/Issue: Volume 7 , Issue 4 (2024)

Abstract:

In this research work, we developed a mathematical model of a digital currency market, involving daily closing price as a function of time. We proposed the Artificial Neural Network (ANN) model. We observed that our ANN model was able to predict the daily closing price of Bitcoin and also make six weeks forecast to a reasonable degree of accuracy. We equally observe that the time dependent ANN model can actually give digital currency traders and investors a clue on when to trade off their digital assets with minimum risk. We therefore, recommend that ANN model should be incorporated into digital currency trading platforms as a signal tool to enable digital currency traders take more informed and less risky trading decisions. From our findings, we would advise traders who wish to employ ANN model to consider a smaller time frame say a few weeks’ time interval for their predictions. We observed also that ANN models have limitations when it comes to manual computation or implementation in Microsoft Excel, especially when dealing with very large input values. This is because of the saturation characteristic of our ANN inner layer activation function (viz; tanh function) which can lead to identical output values for different input values, making it difficult to replicate the ANN model's behavior. Furthermore, ANN models often involve complex interactions between multiple neurons, layers, and activation functions, which can be challenging to replicate manually.

Keywords:

Digital Currencies, Artificial Neural Network, Bitcoin, Stochastic Modelling.

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