Analysis of Bitcoin Prediction using Transparent and Opaque Machine Learning Algorithms

The unpredictable nature of cryptocurrency markets, particularly Bitcoin, has attracted significant attention from investors, researchers, and financial institutions seeking to understand and predict price movements. This study aims to analyse the effectiveness of both transparent and opaque machine learning algorithms in predicting Bitcoin prices. Transparent algorithms, such as linear regression and decision trees, provide clear insights into the factors influencing predictions. On the other hand, opaque algorithms, like ensemble methods, offer complex, non-linear models that may capture intricate patterns in the data. The main analysis is to lower the mean absolute error and enhance the r2 square, both key indicators of forecast accuracy. The study presents that linear regression and random forest outperformed others, achieving the smallest error and highest variance explanation, suggesting their effectiveness in Bitcoin price prediction with and without outliers respectively. In contrast, the support vector machine underperforms compared to all other machine learning algorithms under consideration. This paper sheds light on the most capable machine-learning techniques for Bitcoin forecasting, aiding trader investment choices and guiding academic study in the field of prediction.