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Data or Noise: Making Sense of the Cryptocurrency Trading Market

Data or Noise: Making Sense of the Crypto Trading Market

By | Cryptocurrency | No Comments

Too good to be true press reports.
Misleading ads.
Unscrupulous exchanges.
“Gold rush” fever.

These are just a few of the things that can overhype crypto-coin value. If you’re a serious investor, how do you resist the hype and rely only on data? Where do you find reliable, unbiased information to guide your trade decisions? If you’ve been in this market long, you know answering those questions is difficult. You’re left to your own ingenuity to figure it out for yourself.

Risky Business

As a cryptocurrency investor, you face risk. That risk is higher because you have no easily accessible tools to help you manage your investments. Unlike the traditional stock market, cryptocurrency investors can’t choose from a wide array of apps or measurement guides to drive their trade decisions. For active traders, it’s difficult to set up investment buy/sell parameters tied to return, liquidity, or market movement.

All investment carries risk, but in new and uncertain markets, that risk is heavier. The price volatility of cryptocurrency convinces some traders to stay away, or to only invest small sums. Others are suckered by the hype and gamble too much based on too little information.

Many factors affect coin prices—social media buzz, news reports, trade activity. It’s hard, if not impossible, for traders to calculate how each factor plays into cryptocurrency price fluctuations. To compound matters, traders are hit with lots of information at every step of the trading process. Investors find themselves making trade decisions based on scattered information from random online sources. Scouring that information takes time and adds uncertainty to the process.

How AI and Machine Learning Manage Risk

The cryptocurrency market is nuanced, complex, and volatile. As this market matures, it attracts more interested traders. That interest will create demand for tools that support both casual and professional investors at each step of the trading process—from building a portfolio to developing and improving trade strategies. Any solution must address the two core questions that traders ask: How can I understand the market to better build my portfolio? How can I manage my trade strategy?

These are also the questions that Coinscious has asked. Our team of blockchain engineers, data scientists, and AI researchers found the answers in AI and deep learning. Using deep neural networks, the Coinscious Collective™ platform has been trained to automatically recognize patterns and make predictions by observing data. The platform applies statistical machine learning algorithms to the cryptocurrency market to understand and recognize the patterns in available data.

With these technologies, the platform extracts the information needed to help traders make informed decisions. The platform’s AI and machine learning capabilities focus on areas that investors care about most: future value prediction, uncertainty estimation, market correlation detection, and monetary and coin movement patterns.

Separating Data from Noise

The goal of the Coinscious Collective™ platform is to separate signal from noise in price data, trade data, social media data, etc. We have three goals:

  • To be immune to noise as much as possible
  • To determine the noise-to-signal ratio at any given time
  • To improve the decision making process for traders and investors

Whether in the stock market or crypto market, information overload often drowns out the valuable signal. The ability to separate noise from data helps investors better evaluate market performance and create smarter strategies. In fact, studies show that what separates successful traders from all the others is the ability to distinguish data that matters from information that doesn’t.

With the explosive growth of data, information overload is a common problem and causes traders to get distracted. This creates a number of problems for serious traders:

  • The chance of discovering meaningful information is equivalent to finding a needle in an exponentially growing haystack.
  • There are limits to how much information any human can process and filter.
  • Even if you overcome the first two limits, human bias accumulates over time and affects the filtering process.

To remedy this, Coinscious leverages an AI system. Using deep learning, the platform uncovers hidden patterns. The platform achieves this through gathering a good representation of data (i.e. feature engineering), ensuring the model extracts noise while also generalizing future trends, and modeling uncertainty. It’s with this process that the Coinscious Collective™ platform limits non-essential data and delivers statistically credible information. If you’re a serious investor, you can spend your day trying to find the right information, or you can let Coinscious deliver the right information to you.

Want a deeper understanding of the technology behind the Coinscious Collective™ platform? Learn how Coinscious works.