Development of a Machine Learning model (algorithm) to predict the

price of Ethereum.

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TABLE OF CONTENTS
Chapter 1 INTRODUCTION.....................................................................................................................3
Background........................................................................................................................................3
Rationale of the Study.......................................................................................................................4
Problem Statement...........................................................................................................................5
Aim of the study................................................................................................................................5
Research Objectives..........................................................................................................................5
Research Questions...........................................................................................................................6
Significance of the study....................................................................................................................6
Layout of the Proposed Thesis..........................................................................................................6

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 CHAPTER 1 INTRODUCTION
Background
Cryptocurrency markets are evolving as per previous growths identified. Considering that
among of cryptocurrency users who are active are determined specifically to be around 2.9
and 5.8 million in the year 2017. There are several investors who are trying to use
Cryptocurrency and blockchain technology for their new investment opportunities and
technological advancements. As new currencies are developed based on previous ones some
of them which are very popular include Ethereum and Bitcoin. However, their prices are
consequently higher and works across the larger marketspace virtually. Also, total market
capitalization of cryptocurrencies are also increasing due to new changes identified. For
example, capitalization in the market is based on calculations such as by multiplying the price
of a cryptocurrency with the total amount of the cryptocurrency’s units. When all the
currencies are measured, total capitalization in market is reached around 250 billion USD
over different cryptocurrencies which are wrote specifically.

Bitcoins and Ethereum both are digital currencies which are highly used in Blockchain which
keeps open and distributed ledger for each organization or investor. The technology is useful
as Ethereum specifically will help in removing concerns of traditional financial system in
which issues comes transaction costs and lack of security. One of the reasons includes that
Blockchain works over a decentralized architecture and have a peer-to-peer network using
consensus protocols. The Cryptocurrencies does not work as a traditional financial asset for
which investors have taken them into consideration for receiving diversify in investment
portfolios. Henceforth, Ethereum as a cryptocurrency will work and have huge potential for
receiving profits due to high volatility.

Thus Ethereum works as a brand-new category of financial assets known as digital currencies
has received much interest during the last few years which perform financial transactions
from virtual money across border specific countries. Although bitcoins are the most well-
known, a variety of other cryptocurrencies have been invented such Ethereum. The
researcher’s involvement in these assets has expanded as well as the market value is also
increasing. The estimation of returns on financial products is found challenging and time-
consuming because of non-accuracy. Since crypto markets and research are both very
interested in learning how could new research helps the prediction analysis and pricing value

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forecasting, this research proposes a new machine learning model adopted for Ethereum price
predictions.

Machine learning a very vast branch of AI which helps the businesses through several ways
such as prediction of consumer purchase habits, marketing trends, and determining popular
product as per customer’s perceptions are behaviours. As price prediction will help traders
and investors to keep their money safe and does not enter any fluctional period, the
combination with machine learning could help in creating a accuracy model. The integration
of machine learning and cryptocurrencies could be identified in trading, mining strategies,
and deep learning for managing Crypto-jacking that infilter the ledger with suspicious
activities for achieving personal information. Henceforth, the integration of machine learning
models could help in improving pricing models through predictions and accuracy as primary
and important dimensions.

Rationale of the Study

Machine learning [ML] is a sub-field of AI which is gaining wide recognition in making
predictions and accuracy on various sectors. This study’s rationale also focuses on
determining how accurate is the Machine learning model in directing the price of Ethereum
successfully. All the existing researches are surrounded for gathering usage of machine
learning techniques and with time series prediction. However, the area related to price
prediction of a specific cryptocurrency is missing. Additionally, Ethereum is a very wide
spread technology which is increasing on growth rate in recent years and have top
performance in financial services. The currency is actually in a transient stage which provides
status as being more volatile as compared with other currencies such as the USD. Thus,
scope of study is specific to understand prediction and accuracy feature of ML model in
Ethereum pricing.

Problem Statement
The major problem in current research is that it only focuses on predictions and machine
learning models implementation however a specific model for blockchain technology is
missed. Also, in the Ethereum exchange rate there is a major challenge which is chance of
high rate in price fluctuation. A higher price volatility state that definitive prediction measure
should be adopted to gather price of Ethereum correct. In addition to this, forecasting is not
adopted presently to notify the future price. There lacks a trust as well as acceptance to
conduct operations virtual cryptocurrency space. There are several factors which determine

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economic role and international relation of countries for different marketing strategies for
cryptocurrency including political system, public relations, and market policy. Another
significant concern is that there is no official development for consistency in cryptocurrency.
One of the reasons is that exchange platform for transactions lacks a clear description in
regulation of buying and selling. This study will try to resolve issues and establish a machine
learning model which could forecast price of Ethereum with efficiency so that policy makers
and investors risks are controlled. Besides, if accurate predications are made the problem
with higher fluctuation is resolved and earn higher profits in businesses respectively.

Aim of the study

There is an increase in cryptocurrency use among the businesses for financial services and
faster transactions across cross border countries. However, presently some issues are
identified in blockchain technology such as security, utilization and efficiency. To resolve
business problems, this study aims to develop a machine learning algorithm which will
predict price of Ethereum as cryptocurrency.

Research Objectives
The following objectives are identified for this key research evaluation:

 Understanding of volatility in the digital asset, finance services, and cryptocurrency

markets.
 To determine factors which affect the volatility of the cryptocurrency market.
 Usage of Time series analysis for studying different Ethereum price trends.
 Creation of a machine learning algorithm which predict Ethereum price through Deep
learning LSTM model.
 Develop Ethereum price predictions using the Machine Learning Model.

Research Questions
The research objectives identify the proposed research questions feasible in the study.

1. What are the major challenges faced by crypto currency markets and why there is
need for ML integration?
2. Identify the factors for volatility and implications in the digital asset/Cryptocurrency
market?
3. How Ethereum price trends are analysed using various methods?
4. Explain Time series analysis for Ethereum price trends?

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 5. Explain Deep learning LSTM model and it’s use in development of a ML model for
Ethereum price prediction?

Significance of the study

The machine learning and related fields have provided several prediction models helpful to
the businesses and industrial sectors. The technological expansion with help of machine
learning algorithms have offered product improvements useful to people across the globe on
online shopping and retailing. With inception of machine learning as specific brand of AI,
researchers have developed new techniques in the financial markets. Considering Stock
market prediction and manipulation detection as major examples which helped in trading
processes. This study is significant on similar concept because cryptocurrencies are looked
as an important asset and required by many businesses to deal with cross border finance
transactions. Also, previous research suggest that Blockchain technology focuses on only
non-technological aspects of Blockchain technology including legal and criminal concerns.
This study will help to identify other roles of cryptocurrencies by integrating it to the
machine learning techniques. This study will also be important for new researchers who are
interested in identifying prediction analysis models. Furthermore, empirical techniques in this
research will be resourceful to make certain observations in other researches. The quantitative
analysis depicts that performance of machine learning techniques could successfully predict
future prices of cryptocurrency Ethereum. Henceforth, financial services could be improved
by the companies if they incorporate this proposed model in prediction process.

Layout of the Proposed Thesis

The layout for proposed thesis is provided in chapter-wise division to conduct research
through structured approach.

In chapter 1, the purpose is to understand the need for research process. Presently,
cryptocurrencies are adopted by different business organizations to operate business
smoothly. However, due to business problems it directs the adoption of machine learning
model to predict Ethereum price. This chapter identified background, problem, aim,
objectives, and research questions, significance.

In chapter 2, literature review for defining works of authors previously on machine learning,
cryptocurrency volatility, and impact for Ethereum price predictions will be identified.

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In chapter 3, a specific research methodology through primary and secondary research will be
designed. The research gaps will help to determine how new work will fill solution on
Ethereum price predictions.

In chapter 4, discussion and evaluation based on research will help in understanding how ML
model is useful in blockchain technology.

In chapter 5, results are presented which helps to answer research questions and resolve
concerns in problems identified.

In chapter 6, conclusion and recommendations identifies findings as well as future direction

with suggestions on feasibility of ML model.