Chapter – 1

Introduction
Building algorithms and models to predict prices and future events has been given a
significant amount of attention in the past decade. With user data being collected through
various forms of paths, there has never been an abundance in raw data like there is now. Any
model capable of predicting a future event whether it be to find out what the next big trend is
or to predict the next behavior of a customer, most predictive models possess great potential
to change opportunity into revenue. The price prediction category is no different. For years
analysts and researches have been studying and trying to improve algorithms to help predict
future prices. Unfortunately, the protections cannot be based purely on just previous prices,
though it should still considered to have the most contribution to the model, other things such
as economic growth, social and popularity of the commodity also play a significant role price
predictions.

1.1 Objectives
The objective of this project is to predict the bitcoin prices based on the data and providing
information to user that in which direction price will move.

1.2 Problem Specification

For years analysts and researches have been studying and trying to improve algorithms to
help predict future prices. Unfortunately, the predictions cannot be based purely on just
previous prices, though it should still considered to have the most contribution to the model,
other things such as economic growth, social and popularity of the commodity also play a
significant role price predictions.
A methodology was developed for predicting Bitcoin price by predicted trading volume
using Google Trends views. However, one limitation of such studies is the often small sample
size, and propensity for misinformation to spread through various (social) media channels
such as Twitter or on message boards such as Reddit, which artificially inflate/deflate prices
[5]. In the Bitcoin exchanges liquidity is considerably limited. As a result, the market suffers
from a greater risk of manipulation. For this reason, sentiment from social media is not
considered further.
  Predictions based solely on previous data results in low accuracy.
 Sentiment analysis is not considered to be a factor because social media suffer from
greater risk of manipulation

1.3 Methodologies
Support vector machine algorithms have been successfully used in the past as we studies in
research works done in . In particular, support vector machines (SVM) are suggested to work
well with small or noisy data and this have been used widely in the asset returns prediction
problems. SVM classification has the advantage of yielding global optimal values. In this
project, a predictive model is analyzed based on the input and the accuracy of the result. The
model was built using the SVM.

Having the data is critical to build and machine learning model and the quality of data is also
important. In such a scenario, there is need to be an algorithm and procedure to check
whether the given data is valid. In the project, an anomaly detection model was implemented
by using unsupervised learning. K-means clustering was used to group the data into m-data
points as there are no labels for the data. Once the group is ready the data was fed into a
unsupervised support vector machine to recognize the anomalies in the given sequence of m-
data points.

The neural networks built on in this project were completed using the Keras libraries. Keras
offers neural network API which can run on Tensorflow or Theano. Keras was selected for its
user-friendly API’s and its ability to support multiple CPU’s as well as GPU’s. Keras
facilitates seamless prototyping. Like all python libraries Keras also takes advantages of the
modularity concept providing users with independent configurable modules. These modules
are also customizable allowing the developers to create new and more effective model to suit
their requirements. Since all the code is purely written in python, python developers do not
find it hard to debug or run complex modified code.

1.4 Contributions
This project differs from the already done studies in that it is among the first to examine the
predictability of bitcoin value using a predictive model using deep learning methodology.
1.5 Organization Of The Project
The rest of the project is organized as follows.
Chapter 2 discusses the related work done in the area of bitcoin price prediction. This section
greatly helped us to work on our project giving precise areas for improvement.
Chapter 3 gives the software requirements, hardware requirements, functional and non
functional requirements of the proposed project work .
Chapter 4 discusses the project design with System Architecture, DFD, UML Diagram and
ER Diagrams.
Chapter 5 give overall implementation details of our project.
Chapter 6 provides the testing part, test cases and results
The last chapter gives conclusion and future prospects.