Solex.ai is an online platform crowdsourcing financial market insights from user forecasts. It was founded by Alex Merkulov and went live two years ago. Four forecasting charts are available to more than 14,000 registered users, which they use to submit opinions on short-term movements in future asset prices. Whether one predicts the value of S&P500, Tesla, Bitcoin, or WTI oil, they receive a monetary award if their market call is accurate. Behind this simple idea of “many heads are better than one” lies the law of large numbers and a sophisticated product design with positive feedback loops and extensive research of users’ forecasting journeys. These components allow Solex.ai to increase competition and refine the forecasting output.
During its first two years of operation, Solex.ai has achieved impressive stats. A steadily growing community of returning users has submitted nearly 1,500,000 forecasts for processing. The total amount of forecaster awards exceeds $26,000. Yet, behind the curtains of flashy product metrics, the central hypothesis test lies deeper in statistics and modern data science. One might be an economics scholar indoctrinated to efficient markets or a trader trying to explore market inefficiencies to own financial gains. However, people can’t reasonably object to the stochastic nature of price movements. So, the Solex.ai founders and team have spent two years seeking to answer THE question: does the Solex.ai community produce forecasting data which is statistically better than the white noise? Today, we are ready to share our findings.
Warren Buffett paraphrased Ben Graham in 1987, saying, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” Solex.ai collects, on average, over 20,000 forecasts weekly and produces a weighted average prediction using an in-house algorithm. The latter uses each forecaster’s performance as a reference benchmark. We then employ Mean Absolute Percentage Error (MAPE) as a relative scale-independent measure of forecast accuracy, insensitive to the direction of the error. Naturally, the lower the MAPE, the better the Solex.ai community performs. Still, we don’t crave for perfect score achievement at all costs — the improved dynamics and consistency across different asset classes are of greater importance for our idea verification. So, to test our hypothesis, we have intentionally used various assets to see how well the Internet crowd can read a given market depending on its nature, size, maturity and volatility.
S&P500 is a popular index with moderate volatility and daily movement rarely exceeding 2% to 3%. Yet, in 2022 — a year of poor performance for a broad stock market — it took our community some time to adjust to the new reality of prices reacting to policy decisions. However, eventually, a miracle happened: our average monthly MAPE remained within a tight 0.63% to 1.02% range for eight consecutive months, regardless of the index volatility and directional movements. Together, we learned to be more aware of macro news, watch for catalysts and predict the possible outcomes that were yet to be reflected in the price.
As one might argue that SPX is too dull for those interested not solely in a retirement cushion, we have added Elon Musk’s favourite creation, TSLA, to our asset list. A sea of long and short, primarily leveraged or derivative, positions had been brutally liquidated due to rapid movements in Tesla stock. Occasionally, its price moves irrationally and opposite to common sense, but it is still possible to predict. Solex.ai forecasters have reached 2% to 4% MAPE even on such a volatile stock. The outlying August and September 2022 are not the forecast deterioration but the community’s unpreparedness for the 1:3 TSLA stock split. Lesson learned — on the markets, every corner case is essential!
Commodities are another asset class with a distinct pattern of price movements involving long trend or sideways periods accompanied by sharp turns and unpredicted supply and demand imbalances. After the spring 2022 turbulence in the oil market caused by the gradual exclusion of sanctions-struck Russia for its invasion of Ukraine, our community’s forecasting accuracy for WTI oil has improved dramatically, with MAPE remaining within a 1% to 2% range. Nevertheless, oil prices teach us always to be prepared for market price breakouts and watch closely after the events that might cause them.
Last but not least, the self-proclaimed king of the crypto Wild West, Bitcoin. Leaving behind the discussion about Bitcoin’s intrinsic value, we can ascertain that the Bitcoin market is maturing. It continues attracting more established institutions’ interest, albeit it has cooled off after the recent crypto-industry crashes. The coin’s price correlates increasingly with traditional markets and demonstrates the ability to withstand extreme short-term volatility. Unfortunately, the lasting crypto winter has made the forecasting accuracy somewhat inconsistent and unpredictable. Still, we observe early signs that the Solex.ai forecasting community is moving towards achieving a stable MAPE for BTC, ranging between 2% and 3%. This fact suggests that the wisdom of the crowds can efficiently forecast even the most speculative assets.
Within two years of going online, Solex.ai has achieved a consistent median MAPE of less than 3% across multiple asset classes, performing significantly better on less volatile assets and shorter time frames. Although we are incredibly proud of our results to date, we see them as a basis for future improvement. How good do you consider our current MAPE to be? We are keen to learn your opinion about it and any ideas you may have on improving our forecasts!
Solex.ai’s journey to disrupt the forecasting data market is at its early stages. Much more is to come — an upgraded, intuitive forecasting interface, increased awards for best forecasters, a user incentives program, and access to unbiased market forecasts and individualised analytics! Our insights are improving with every forecaster joining the Solex.ai community, so we encourage you to become a Solexer to learn and earn together!
