At the Disrupt Berlin hackathon developers presented an app which leverages machine learning to monitor bitcoin markets and news and social media platforms, to give early warning of impending volatility.
Bitcoin Bubble Burst watches for price changes and major news events that could impact cryptocurrency markets and provides real time alerts to users. There are multiple existing apps that warn of such changes but none that flag impending volatility in exactly the same way, using machine learning algorithms that have been specifically trained using bitcoin price change data sets.
"All it would take would be one terrorist incident in the U.S. funded by bitcoin for the U.S. regulator to much more seriously step in and take action," UBS Group AG Chief Investment Officer Mark Haefele said, as cited by Bloomberg.
Investment banks the world over have toyed with the idea of betting big on cryptocurrencies, but even the overwhelming processing power of their algorithmic traders has yet to convince them the cryptomarkets are worth the risk.
News items covered by such predictive apps might include national bans on bitcoin and taxation proposals for cryptocurrency trading and will trigger an automated email once the aggregated news passes a certain threshold of importance and frequency of reporting – meaning, theoretically, users of the app won't be notification bombed.
Bitcoin Bubble Burst’s creators are careful about the nature of the alerts they send and allegedly won't just send non-stop sell order advice, though critics might point out there is far too much potential for abuse or market manipulation were such apps to be adopted worldwide.
For context, bitcoin has a limited supply of 21 million, which the world is predicted to reach by 2140 (analysts predict there will be roughly 17 million bitcoins in circulation by 2027) reports CNBC. The current market capitalization for the cryptocurrency is around $190 billion, but market analyst Kay Van-Petersen predicts we could be looking at a future market cap of around $1.75 trillion.
Key indicators Bubble Burst, and similar apps, will flag are the latest price ceilings, social media reactions and value predictions. The developers, Claudio Weck, Saad El Hajjaji, and Karthick Perum, plan to introduce new notification methods including SMS, while also allowing users to dictate which price threshold they wish to use to trigger notifications.
Bitcoin's unassailable ascent has proven patient bulls right time and time again, especially in recent months, as repeated rumors of its impending collapse have been grossly exaggerated, leading market bulls to make ever-more outrageous claims as the weeks pass.
As so-called ‘forks’ (spin-off cryptocurrencies) provide a looming threat to devalue bitcoin, other cryptos like ethereum, the world's second largest digital currency, have posted gains. However, whatever piggyback gains ether has made still pale in comparison to the surges in both bitcoin and bitcoin cash over the same timeframe.
Part of the inherent charm of cryptocurrencies is the volatility, which weakens or, at the very least, tests major investment banks' risk appetite, greatly favoring the retail investor over the institutional, for now.
“Something that moves 20 percent [overnight] does not feel like a currency. It is a vehicle to perpetrate fraud,” said Lloyd Blankfein, chief executive of Goldman Sachs as cited by The Guardian.
The cryptocurrency asset class is the currency of choice for the online purchase of illicit materials on the Dark Web, for allegedly covering up major capital flight and the target of unscrupulous hackers behind the recent spate of ransomware attacks.
Governments continue to struggle to get a grip on cryptos with Initial Coin Offerings (ICOs) falling flat for the most part but that hasn’t dissuaded lawmakers from trying their hand at the burgeoning currency market. Capital gains tax does apply to any profits garnered through the sale, gifting or exchange of a person’s assets, in this case their bitcoins, in countries such as the Republic of Ireland, for example.
