The goal of this chapter is to develop a prototype of a system that will predict the short-term change of Bitcoin price, using historical data to train the algorithm, and real-time data to predict and select algorithms that perform better. In the scope of this project, there is no attempt to predict the actual price in dollars, but only whether it would increase or not. This is because Bitcoin price, to some extent, is not actually about price but about market expectations. This can be seen as patterns in a trader's behavior, which, on a higher level, is represented by previous price itself.
Figure 3: High-level data pipeline of the prototype
Of course, there is an objective price associated with Bitcoin; miners are willing to sell Bitcoins for profit. So the base price can be estimated by knowing all bills that all miners have to pay for the Bitcoins they mine, but that is outside the scope of this project.
From this perspective, rather than trying...