Starting Point

As mentioned previously we will setup the AI to learn and trade across seven separate cryptocurrencies. Each will trade vs USD or a USD equivalent. Tether is a coin that has been issued and is backed by an equivalent amount of USD to the value tracks the dollar 1:1 so we use this on Poloniex that doesn’t support holding fiat currencies.

The system is designed with the capability to trade automatically when a signal is given. Poloniex has an API which we can use; First Global Credit doesn’t currently have an API but we have written our own interface to auto-trade. They are apparently working on an API interface e so we will switch to that when available.

We have adjusted the amount of capital across each coin based approximately on the market capitalisation of the total coin market. While this does skew the early results to be dominated by the largest market, bitcoin, we believe this will be offset over time by the increased volatility of the smaller capitalisation coins. All else being equal these two factors will hopefully balance out.

So to summarise the amount available for the trading of each coin is:

Bitcoin: $16900
Etherium:  $4800
ZCash: $610
Ether Classic: $203
DASH: $610
Monero: $305
Ripple: $510

Total: $23,938

 

So What Are Cryptocurrencies?

As promised I thought a brief overview of what cryptocurrencies are may be a useful intro.

Some of you may be familiar with Bitcoin. Bitcoin is the leading cryptocurrency of the moment and was released into the world by it’s anonymous creator under the name Satoshi Nakamoto.

The concept of Bitcoin was first published on the internet in November 2008 under the title “bitcoin: A Peer-to-Peer Electronic Cash System” from this white paper the original bitcoin code was developed and released in January 2009 as an Open Source project and Satoshi mined the first block of bitcoins ever (the genesis block). The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000BTC used to purchase two pizzas delivered by Papa John’s (current value of that 10,000BTC is in excess of $10m).

Cryptocurrencies are digital or virtual currencies that use cryptography for security. A defining feature of a cryptocurrency (until recently) is it is organic in nature; it is not issued by any central authority, rendering it theoretically immune to Government interference or manipulation.

This feature may be watered down by some of the private blockchain based currencies now being proposed by Central Banks to issue their own currencies. For our purposes we will differentiate between Public Cryptocurrencies (those held on a public Blockchain such as bitcoin) and Private Cryptocurrencies (those released on a private chain under the control of an issuing authority.

The other unique element of cryptocurrencies – all transactions are executed by “signing” the transaction with a private key. This private key is known only to the holder of the funds and by signing the transaction the holder of the funds issues a transaction from his own wallet address to the recipients wallet address. Without this private key the funds cannot be transferred – another benefit that prevents automatic confiscation or removal of your funds.

These transactions are all held on the Peer to Peer network and are validated by participants on this network. For bitcoin and most of the other leading public blockchains this validation uses a “Proof of Work” model. This sets the task for “miners” to solve a cryptographic puzzle that allows them to fix the next block of transactions on the blockchain. By rewarding these miners with distribution of bitcoin the network encourages the mining activity and the collective participants on the network validating the chains ensures that the blockchain is not corrupted or rewritten by a “bad actor” in the infrastructure.

It’s worth noting that there are other validation schemes being proposed, especially for private blockchains and in the public chain domain some are proposing alternative validation such as “Proof of Stake” – these are untried at this stage but overcome one of the leading concerns with Proof of Work, the unnecessary power consumption and computing power utilised for “wasted” effort.

For the purpose of our test trading we will focus entirely on Public Cryptocurrencies. Our starting markets will be:

Bitcoin – $16,900 trading Capital
Etherium – $4800 trading capital
ZCash – $610 trading capital
Etherium Classic – $203 trading capital
DASH – $610 trading capital
Monero – $305 trading capital
Ripple – $510 trading capital

We will follow a simple model if simply switching into the cryptocurrencies when the model believes the market will rise and move back into USD when the model believes the market is going to decline.

The exchanges we will use are First Global Credit for the Bitcoins (www.firstglobalcredit.com) and Poloniex for the other coins (www.poloniex.com). Poloniex does not support USD holdings so we will switch into Tether-USD, a USD proxy tradable on Poloniex.

We will publish a trading update whenever trades are executed or weekly if no trades have executed during the week.

— Wintermute —

Welcome to Our AI Bot

Hi, we’re really excited about our new project so we wanted to share some of the details….There’s our first hurdle – we’re in stealth mode and are not permitted to divulge to much information on the end product we are working towards…so What can I say? So we’ve discussed with the founders what is proprietary and what can be shared – the good news we can give a lot of insight into our modelling, the general purpose of the model and some testing results. Hopefully over time we can also start to reveal some of the specifics of the primary models we are working on.

So, as I’m sure you’ve guessed we are working on utilising AI. We’ve set ourselves up to compete in one of the most challenging arena’s out there – financial trading. As I said – we can’t publish results yet for the primary model but what we have done is started training an AI trading bot to trade cryptocurrencies.

For those who are unfamiliar with the field I will present a summary in a later post but suffice to say it is a volatile set of markets that will provide a real testing ground for the models.

Our intention with this blog is to use it as a real-time lab report, giving details of trades executed in the markets and also giving some insight into the underlying structure of the models we are developing and the thinking behind them.

We welcome any questions, comments, or insights – the purpose is to share ideas and learn from others – not just spout our views to everyone.

Thanks for reading

–Wintermute —