Using AI to Predict Crypto Prices
by Mildon  |  May 25, 2024

Trading cryptocurrency is kind of like predicting the weather. After a while, even without tools, you start to get a feel for it. Just like you can tell the rain is about to stop after it has been pouring for a while, you can almost sense when trading activity is slowing down or when the market is about to turn around. You can instinctively predict what's coming next, albeit to some extent.

This instinct likely comes from key moments in crypto history—big price jumps, major crashes, or long bear markets. Now, picture an AI doing the same but with a thorough understanding of historical prices and statistics. It could spot patterns that hint at likely future outcomes with far greater accuracy than a human could.

I've been working on an algorithm to predict future prices for quite some time now. Earlier this year, I developed something that looks quite promising. I call it SoulStone.

SoulStone's accuracy in paper trading (simulated trading without real money) is remarkably high, achieving 97 wins out of 100 trades (97%). However, actual trading results were significantly lower, around 60%. Initially, this didn't make sense, but it soon became clear that the lower success rate was largely due to the self-defeating effects of trading with real assets.

Everything seems great on paper, but in the real world, trading gets tricky. You have to contend with other traders and big players who might frontrun you relentlessly, ultimately causing you to miss your window. If you go for a market buy or sell order, you might end up with a different price than you expected, making it tough to cash in on those small percentage predictions (under 5%).

An insanely accurate price prediction AI would be awesome for crypto trading, but it's still more of a dream than a reality. Perhaps it could work on a large exchange with significant liquidity, especially if the trading process is also automated. However, at this point, I still want to keep my hand on the trigger. The experiment was worthwhile and validated some of my instincts. And even though this tech isn't quite there yet, I think it's not too far off.