MLP-NARX Bitcoin Price Prediction Model Integrating System Identification Modelling Principles

• Published in: International Journal on Informatics Visualization
• Main Author: Nasarudin M.N.F.; Yassin I.M.; Ali M.S.A.M.; Mahmood M.K.A.; Baharom R.; Rizman Z.I.
• Format: Article
• Language: English
• Published: Politeknik Negeri Padang 2022
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85133725195&doi=10.30630%2fjoiv.6.2.943&partnerID=40&md5=06cacf9f82c99943af139c056f025af6

Bitcoin is a decentralized digital currency that enables people to exchange value without requiring a third-party intermediary. Due to its many advantages, it has received much interest from institutional and individual investors. Despite its meteoric increase, the price of Bitcoin is an extremely volatile asset class as it purely relies on supply and demand. This presents an interesting opportunity to create a forecasting model. However, many research papers in this area do not analyze the residuals as part of the forecasting resulting in potentially biased models. In this paper, we demonstrate System Identification (SI) residual analysis techniques for the analysis of our forecasting model. The Multi-Layer Perceptron (MLP) Nonlinear Autoregressive with Exogeneous Inputs (NARX) uses historical price data and several technical indicators to predict the future price movements of Bitcoin. The Particle Swarm Optimization (PSO) algorithm was used to find optimal parameters for the model. The model was able to predict one-day price in the prediction test. The model has successfully captured the dynamics of the data through the tests performed on residuals. It also proves the randomness of residuals, albeit with some minor violations. © 2022, Politeknik Negeri Padang. All rights reserved.