Bitcoin Price Direction Prediction Using Machine Learning on a Very Small Dataset

Abstract

Investment advisory services are now commonly offered by consulting firms with financial experts, typically for a monthly fee. Financial markets require specialized knowledge, but advancements in artificial intelligence have revolutionized this field. Deep learning algorithms, especially Long Short-Term Memory (LSTM) and Gated Recurrent Unit (GRU), are widely used to predict asset price trends in nonlinear time-series data. However, they demand large datasets and are prone to overfitting. Recently, combining deep learning with reinforcement learning has shown promise, though it requires intensive research and computational resources. This study introduces the BTC-PDPR (Bitcoin Price Direction Prediction Robot) model, which predicts Bitcoin's daily price direction using the Random Forest Regressor. As an ensemble-based machine learning model, it works effectively with smaller datasets and identifies key technical indicators influencing price trends. The model achieved a 99.20% accuracy rate on data from March 2018 to the present. It runs efficiently in Google Colab (v5e1 configuration), producing results in just 22 seconds. This paper outlines the methodology, reviews relevant studies from 2017 to 2024, highlights gaps in the literature, and emphasizes the study’s contributions to the field.

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