Improving Ethereum Price Forecasting Through Hybrid Decomposition and LSTM–Attention Mechanisms

This study investigates the predictive performance of decomposition-based deep learning models through a focused case study on Ethereum price forecasting. Using hourly Ethereum price data from 5 September 2020 to 13 July 2025, we develop hybrid forecasting frameworks that integrate three signal decomposition techniques—Wavelet Decomposition (WD), Variational Mode Decomposition (VMD), and Empirical Mode Decomposition (EMD)—with a Long Short-Term Memory network enhanced by an attention mechanism (LSTM–Attention). The decomposition methods are first applied to extract multiple frequency components from the original time series, allowing the forecasting model to capture both short-term fluctuations and long-term dynamics inherent in this specific digital asset. Each decomposed component is then modeled using the LSTM–Attention architecture, and the forecasts are aggregated to produce the final prediction. The predictive performance of the proposed models is evaluated using MAE, MSE, RMSE, and MAPE, and the results are compared with benchmark models including ARIMA-GARCH and standard LSTM–Attention. Forecast accuracy is assessed through out-of-sample one-step-ahead predictions, and robustness is ensured by averaging results across 10 independent runs. The empirical results demonstrate that incorporating decomposition techniques substantially improves forecasting accuracy. Among the tested models, the EMD–LSTM–Attention framework achieves the best performance, producing the lowest forecasting errors. While focused on the Ethereum market, these findings highlight the effectiveness of combining signal decomposition and attention-based deep learning architectures to enhance predictive performance in high-volatility cryptocurrency environments.