Sentiment-Driven and Economic Indicators for Bitcoin Price Forecasting: A Hybrid Time Series Model
DOI:
https://doi.org/10.70882/josrar.2025.v2i1.34Keywords:
Bitcoin price prediction, ARIMA, LSTM, Sentiment analysis, Economic indicatorsAbstract
Bitcoin, the leading cryptocurrency, has gained significant attention due to its high volatility and potential economic impact. Traditional financial forecasting models struggle to accurately predict Bitcoin prices due to its sensitivity to various factors, including market sentiment and macroeconomic conditions. Existing models primarily rely on historical price data, often neglecting external influences such as public sentiment and economic indicators like Gross Domestic Product (GDP). To address these limitations, this study explores a hybrid approach that integrates Autoregressive Integrated Moving Average (ARIMA) and Long Short-Term Memory (LSTM) models with sentiment analysis and GDP data to enhance Bitcoin price prediction accuracy. The study evaluates the predictive capabilities of these models under different scenarios. When trained on Bitcoin price data combined with sentiment analysis and GDP data, the ARIMA model achieved a Mean Absolute Error (MAE) of 2081.66, Root Mean Square Error (RMSE) of 2518.35, and an R-squared value of 0.9143. In comparison, when trained on Bitcoin data alone, it exhibited lower accuracy. The LSTM model demonstrated superior performance, achieving an MAE of 1253.24, RMSE of 1717.65, and an R-squared value of 0.9602 when incorporating sentiment and GDP data, significantly outperforming its standalone counterpart. The results highlight the effectiveness of integrating sentiment analysis and GDP data in cryptocurrency price prediction, demonstrating that hybrid models provide greater forecasting accuracy than traditional approaches. This study offers a robust framework for financial time series forecasting, aiding investors, analysts, and policymakers in making more informed decisions in the cryptocurrency market.
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Copyright (c) 2025 Ibrahim Garba Kabo, Georgina N. Obunadike, Nuruddeen A. Samaila (Author)
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