For the past year, we have been testing a prediction model for the average price of BTC over a 24-hour time interval. We publish the prediction results daily on facebook on our member group (www.facebook.com/groups/sentistocks).
BTC price predictions using Sentistocks tool
We use a tool called “Sentistocks” to predict the average price of BTC. It is based on measuring the intensity of basic emotions as well as sentiment and arousal present in mentions of BTC published on Twitter and Reddit.
Effectiveness of prediction
The achieved high prediction effectiveness allowed us to use the signals of BTC price changes coming from the tested model in the investment process. To find out the real quality of these signals, we assumed an investment of $1000.00 in the purchase of BTC in January 2021. We adopted a FOLLOWING PREDICTIONS strategy trading 100% of the portfolio. For comparison, we also ran a simulation of the commonly used HODL strategy.
As you can see, the FOLLOWING PREDICTIONS strategy proved to be much more effective than HODL in January. This was due to the fact that our model effectively predicted periodic declines in the BTC exchange rate, which allowed us to enter the FIAT currency in advance, avoiding the loss of capital.
The return on invested capital with the FOLLOWING PREDICTIONS strategy reached 66% at the end of January against 13% with the HODL one.
More information about our “Sentistocks” tool can be found in the article https://sentistocks.com/blog/finance-emotions-analysis-predicting-price-trend-btc-bitcoin-forecast-emotions/.