Although Blockchain technology was first discovered in 1991, it became popular when Bitcoin blew the bar by crossing the price of an ounce of gold in March 2017. In recent times we have seen popular figures in Silicon Valley like Elon Musk and Jack Dorsey promoting Cryptocurrencies. Other Cryptocurrencies like Etherium have also scaled new heights. Even Dogecoin, which started as a joke, recently hit the news when it first rallied to a record high and then crashed soon after. While in the initial days, the only way to use Crypto money was to first convert it to fiat, today many companies accept payments in Cryptocurrency directly. This includes big players like Tesla, Microsoft, Twitch, Expedia, Shopify. Many more like Apple, Google Play, Spotify, Uber, and Amazon let users buy gift cards using cryptocurrency. Let’s explore in detail about crypto data mining.
Cryptocurrency vs Fiat Currency
Before we can deep dive into Crypto data mining, let us look at how Cryptocurrency differs from the paper currency that we use. The main difference is that Cryptocurrency is not backed by the central bank of any country. It’s also not tied to any tangible resource (like Gold). Hence, tracking the rise and fall of the international market would not shed much light on the performance of different Cryptocurrencies.
|Backed by governments and central banks.||Digitally encrypted decentralized currency.|
|Intermediaries are required.||No intermediaries are required. Any transaction just means an update in the ledger.|
|Legal and accepted worldwide.||Illegal in some countries and accepted by few companies within pre-specified limits.|
|Can be used in physical formats- coins and notes.||Do not exist in physical format. Need to be kept in a digital wallet|
|Safer and more stable, due to government backing.||Can be unstable since they are only backed by public trust and acceptance.|
Such currencies aren’t backed by any central system nor are they tied to any geographical locations. The distributed ledger based on blockchain technology that powers them is usually maintained by a network of machines and whenever any update is performed in the database, every system applies it.
Even buying and selling these do not require a mediator or a commercial entity. That said, you would need a wallet provided by a company like Coinbase to buy or sell your coins. Since there are no traditional banks or institutions involved, unlike currency transfers, there’s no way to track down cryptocurrency.
What has Caused Cryptocurrencies to Rise and Fall?
To understand which data points can be useful to track the prices of Cryptocurrencies like Bitcoin or Ethereum, we first need to analyze the major events that caused their prices to fluctuate abruptly.
While overall there has been a massive growth in prices for all the major Cryptocurrencies, there have been certain abrupt price changes as well. Here are some of the major external factors that impacted Crypto-prices:
- Spike in Dogecoin prices due to support from Elon Musk.
- Subsequent fall when markets realized that it was overpriced.
- The rise in Bitcoin prices due to investments in the cryptocurrency from institutions like Tesla and MicroStrategy, along with greater adoption thanks to companies like Paypal.
- The pandemic followed by inflation caused more and more individuals to invest in various Cryptocurrencies thus increasing their market cap.
- Fall in prices of Bitcoin in March 2021 when India was reconsidering a ban and in April 2021, when Turkey issued a complete ban on cryptocurrency usage.
What Data Can You Scrape?
When it comes to Cryptocurrencies, there’s a lot of public data that can help you decide whether to buy, sell, or hold your coins. But one must take calculated bets to minimize losses. Decrypting the data and understanding how exactly it would affect the Cryptocurrency market is something that takes time and needs to be handled patiently. Thorough risk analysis needs to be done, before making any major decisions and this is where data comes in.
Monitoring major Cryptocurrency prices
Usually, most of the top Cryptocurrencies like Bitcoin and Etherium show the general trend in investor sentiment regarding Cryptocurrencies. Tracking the prices of the top 5 or 10 Cryptocurrencies can be a great way to find the sweet spot of when to invest your money or for finding an upward or downward trend.
Keep track of government decisions on Cryptocurrency
While some countries have banned Cryptocurrencies, some have announced that they are considering a ban. Any such news or announcement usually causes a media frenzy and it leads to investor mistrust that in turn causes prices to drop. While most of these announcements are sudden, you could track them to place a purchase order once the prices fall after such a ban, since they usually crawl back up very soon.
Track companies that start accepting payments in Cryptocurrency
Companies accepting payment in Cryptocurrency is usually big news and pushes prices upwards. Companies usually announce whether they will be accepting Bitcoin or multiple Cryptocurrencies. Tracking these can provide you deep insights into the overall acceptance rate of each Cryptocurrency and can also help you sell and make a profit since these usually cause the prices to rise sharply.
Scrape media coverage and news articles
Media coverage of Cryptocurrency can sometimes result in changes in the market. News of investments by public or government entities in the Crypto-market or of companies converting their cash savings to Crypto-coins can have a positive effect and help prices rise. Multiple such events can push prices to their highest levels over a longer period and hence need to be tracked.
Using alternative data sources
Cryptocurrencies like Bitcoin are not tied to any tangible asset. Their prices depend on user acceptance and trust. Based on a 2018 report, in a single day, the price of Bitcoin had a 0.4% chance of falling to zero. There can however be a gradual fall, if investor sentiments waver or if a more advanced technology renders it obsolete. Since it does on have any intrinsic value, if the demand for it falls, prices would also keep falling, and eventually, it would lose its complete value. This is why scraping data from alternate data sources and keeping track of user sentiments plays the largest role when it comes to Crypto data mining.
Crypto Data Mining – Where to Scrape Data from?
While we did discuss the data points and the events that need to be tracked and scraped, knowing what data to scrape isn’t enough. You also need to know where to scrape such data from. Tracking the prices of each cryptocurrency should be simple. You can scrape data from any website that shows aggregate values for multiple cryptocurrencies. You will need to scrape historical data first, and then create a cronjob that would scrape data related to the prices at regular intervals. This interval has to be seconds or minutes at max since Cryptocurrency prices have risen or fallen sharply in the past.
When it comes to scraping data related to the latest happenings in the world of Blockchain and Cryptocurrency, you can scrape data from multiple websites that keep updated news on different activities around the world. You can choose from multiple websites like TodayOnChain, CoinDesk, CoinTelegraph, and CCN. You can use keyword matching to identify which Cryptocurrency an article is about and then use sentiment analysis to determine if it is positive or negative. Some manual efforts may be required but you can use an automated system to perform an initial round of filtering.
Unlike Fiat currency, Cryptocurrency has seen major disturbances and sudden rise and fall, all due to social media. One of the biggest examples of this is when Elon Musk changed his Twitter bio to “#bitcoin” and caused the Cryptocurrency to rally by as much as 20%. Tapping into non-conventional data sources such as tweets, as well as Reddit channels where discussion on Cryptocurrencies are frequent is an absolute must to find such anomalies and use them to your benefit.
While scraping data, and using those data to clear your path to win over the Crypto-Market, you will need to keep in mind a few important points-
- Not all data would have an impact on the prices. You will need to analyze historical and fresh data to figure out the false positives.
- While scraping data, you will have to make sure that you take into account the legal constraints and abide by the laws of the country you reside in.
- There are certain limitations that need to be factored in when you are writing your own DIY code to scrape such data. IP rotation and pausing before multiple hits so as to not overburden the server are just two of those.
The pandemic has caused many to turn to Cryptocurrency to invest their savings, due to fear of traditional instruments failing. It should however be noted that unless you have the right data in hand, and performed the proper risk analysis, you could end up being one of the losers in the game. Crypto data mining along with analytical skills can however help you make the most of this new age money-making instrument.