• Dear jury,

We are students from Faculty of Economics and Social Sciences, University of Plovdiv Paisii Hilendarski. As we are first year students and have not studied any programming languages we tried to forecasting the value of cryptocurrency with R. Unfortunately, while working with file  price_data1442.csv None of the functions we know, gave satisfying results We are looking forward to receive your comment about the solution we have proposed. Thank you in advance

PU FESS Datathon case solution

#I. Holt-Winters exponential smoothing forecasting method

#Set working directory. In advance please copy the input file price_data1442.csv in C:\RData directory.

setwd(“C:/RData”)

#Read data

df <- read.csv(“price_data1442.csv”)

#Data structure

str(df)

#Select only one column: price (#4 in the input file price_data1442.csv)

#

mydata <- df[, c(4)]

str(mydata)

mydataforecasts <- HoltWinters(mydata, beta=FALSE, gamma=FALSE)

mydataforecasts

#

#Result:

#Holt-Winters exponential smoothing without trend and without seasonal component.

#

#Call:

#HoltWinters(x = mydata, beta = FALSE, gamma = FALSE)

 

#Smoothing parameters:

# alpha: 0.999935

# beta : FALSE

# gamma: FALSE

#

#Coefficients:

#      [,1]

#a 8507.579

#

# => HoltWinters – Not suitable for  forecasting this cryptocurrency.

#

Note: With this method we forecast the price value for every obesrvation made.

#

#II.

#To use Holt’s exponential smoothing to fit a predictive model for currency values, we type:

mydataforecasts <- HoltWinters(mydata, gamma=FALSE)

mydataforecasts

#

#Holt-Winters exponential smoothing with trend and without seasonal component.

#

#Call:

#HoltWinters(x = mydata, gamma = FALSE)

#

#Smoothing parameters:

#alpha: 1

# beta : 0.0002208343

# gamma: FALSE

#

#Coefficients:

#          [,1]

#a 8507.5800000

#b   -0.2355879

mydataforecasts$SSE

#[1] 32634137

# Again the mistake is very big => this type of Holt-Winters method is not suitable for forecasting prices of cryptocurrency.

#III

https://www.youtube.com/watch?v=N_XKJqr-VT4&ab_channel=MichaelGrogan

install.packages(“ggplot2”)

library(ggplot2)

setwd(“C:/RData”)

df <- read.csv(“price_data1442.csv”)

str(df)

#Select only two columns for our data frame: time (column #2) and price (column #4)

mydata <- df[, c(2,4)]

str(mydata)

#

#Trend, seasonality and error extraction

tsprice <- mydata[ ,2] #ts data

decomposed <- decompose(tsprice, type=”mult”)

#Error in decompose(tsprice, type = “mult”):   time series has no or less than 2 periods

decomposed <- decompose(tsprice, type=”additive”)

#Error in decompose(tsprice, type = “additive”):   time series has no or less than 2 periods

#plot(decomposed)

#stlRes <-stl(tsprice, s.window=”periodic”)

# Decomposition is impossible.

 

#Correlation tests

cor.test(mydata$price, as.numeric(mydata$time), method=c(“pearson”, “kendall”, “spearman”))

# cor = -0.3958351

#The correlation is missing.

 

#De-trend the crypto time series

trModel <- lm(mydata$price ~ mydata$time)

plot(resid(trModel), type=”l”)  # resid(trModel) contains the de-trended series.

trModel

#Result:

#Call:

#lm(formula = mydata$price ~ mydata$time)

 

#Coefficients:

#(Intercept)  mydata$time

# 10942.3519      -0.1233

#

 

#Auto ARIMA forecasting

install.packages(“MASS”)

install.packages(“tseries”)

install.packages(“forecast”)

library(“MASS”)

library(“tseries”)

library(“forecast”)

 

#Just test without conversion

currencyprice <- mydata$price[2:13758]

currencyprice

 

# ACF, PACF, Dickey-Fuller Test

acf(currencyprice, lag.max=20)

pacf(currencyprice, lag.max=20)

# The stationarity is missing.

 

#Convert to log format and plot

lncurrencyprice=log(mydata$price[2:13758])

lncurrencyprice

# ACF, PACF, Dickey-Fuller Test

acf(lncurrencyprice, lag.max=20)

pacf(lncurrencyprice, lag.max=20)

# The stationarity is missing.

 

#Log difference

diffcurrencyprice =diff(lncurrencyprice$price[2:13758], 1)

diffcurrencyprice

acf(currencyprice, lag.max=20)

pacf(currencyprice, lag.max=20)

# The stationarity is missing again.

 

#Difference

diffcurrencyprice =diff(mydata$price[2:13758], 1)

diffcurrencyprice

acf(currencyprice, lag.max=20)

pacf(currencyprice, lag.max=20)

# The stationarity is missing again.

 

adf.test(mydata$price[2:13758]) # p-value = 0.04

adf.test(diffcurrencyprice) # p-value = 0.01, where p-value < 0.05 indicates the ts is stationary

plot(diffcurrencyprice, type=’l’)

 

#Time series, ACF, PACF, Dickey-Fuller Test

pricearima <- diffcurrencyprice$price[2:13758]

pricearima<- ts(pricearima)

acf(pricearima, lag.max=20)

pacf(pricearima, lag.max=20)

 

# => the stationary model is not appropriate to our data

 

#Auto ARIMA forecast in case of stationarity

fitcurrency <- auto.arima(pricearima)

fitcurrency

 

forecastedvalues=forecast(fitcurrency, h=1440)

forecastedvalues

plot(forecastedvalues)

forecastedvaluesextracted=as.numeric(forecastedvalues$mean)

forecastedvaluesextracted

 

#Percentage error

df <- data.frame(mydata$price[13759:15199, forecastedvaluesextracted)

col_headings <- c(“Actual price”, “Forecasted price”)

names(df) <- col_headings

attach(df)

percentage_error =((df$’Actual price’ – df$’Forecasted price’)/ (df$’Actual price’))

percentage_error

mean(percentage_error)

 

#Ljung-Box

Box.test(fitcurrency$resid, lag=5, type=”Ljung-Box”)

Box.test(fitcurrency$resid, lag=10, type=”Ljung-Box”)

Box.test(fitcurrency$resid, lag=15, type=”Ljung-Box”)