Comparison of Deterministic, Stochastic, and Mixed Approaches to Cryptocurrency Dynamics Analysis

Two approaches are most frequently used to predict the development of cryptocurrency market: deterministic and stochastic. The deterministic approach seeks to explain the development of cryptocurrencies through the relationship of several indicators. A stochastic approach (such as ARIMA) seeks to optimize the parameters of a statistical model. This article aims to compare approaches to the assessing cryptocurrencies development using the number of active Bitcoin and Ethereum wallets. For this purpose, a deterministic model based on the Verhulst equation, and a stochastic model based on ARIMA was formulated. The results show that the usage of relative differences wins over absolute ones. At the same time, the predictive value of a purely deterministic model on short segments is not very high, but it has the advantage in analytical form. Further will focus on the combination of a deterministic Bass-type model and statistical methods with stochastic analysis tools.