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A Scalable Reinforcement Learning-based System Using On-Chain Data for Cryptocurrency Portfolio Management

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  • Zhenhan Huang
  • Fumihide Tanaka

Abstract

On-chain data (metrics) of blockchain networks, akin to company fundamentals, provide crucial and comprehensive insights into the networks. Despite their informative nature, on-chain data have not been utilized in reinforcement learning (RL)-based systems for cryptocurrency (crypto) portfolio management (PM). An intriguing subject is the extent to which the utilization of on-chain data can enhance an RL-based system's return performance compared to baselines. Therefore, in this study, we propose CryptoRLPM, a novel RL-based system incorporating on-chain data for end-to-end crypto PM. CryptoRLPM consists of five units, spanning from information comprehension to trading order execution. In CryptoRLPM, the on-chain data are tested and specified for each crypto to solve the issue of ineffectiveness of metrics. Moreover, the scalable nature of CryptoRLPM allows changes in the portfolios' cryptos at any time. Backtesting results on three portfolios indicate that CryptoRLPM outperforms all the baselines in terms of accumulated rate of return (ARR), daily rate of return (DRR), and Sortino ratio (SR). Particularly, when compared to Bitcoin, CryptoRLPM enhances the ARR, DRR, and SR by at least 83.14%, 0.5603%, and 2.1767 respectively.

Suggested Citation

  • Zhenhan Huang & Fumihide Tanaka, 2023. "A Scalable Reinforcement Learning-based System Using On-Chain Data for Cryptocurrency Portfolio Management," Papers 2307.01599, arXiv.org.
    • Handle: RePEc:arx:papers:2307.01599
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    References listed on IDEAS

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    1. Zhengyao Jiang & Dixing Xu & Jinjun Liang, 2017. "A Deep Reinforcement Learning Framework for the Financial Portfolio Management Problem," Papers 1706.10059, arXiv.org, revised Jul 2017.
    2. Zhenhan Huang & Fumihide Tanaka, 2021. "MSPM: A Modularized and Scalable Multi-Agent Reinforcement Learning-based System for Financial Portfolio Management," Papers 2102.03502, arXiv.org, revised Feb 2022.
    3. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    4. Zhenhan Huang & Fumihide Tanaka, 2022. "MSPM: A modularized and scalable multi-agent reinforcement learning-based system for financial portfolio management," PLOS ONE, Public Library of Science, vol. 17(2), pages 1-24, February.
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