Can AI Change the Crypto Trading Landscape?
Without a doubt, AI can revolutionize the crypto trading landscape as it can easily access and analyze market data. In particular, the use of AI systems in crypto trading is growing rapidly.
Artificial Intelligence commonly known as AI is among the technologies that have taken the world by storm in recent years. Although it started making waves and garnering huge adoption in the 2020s, the history of AI can be traced back to 1956 when it was founded as an academic discipline.
The main idea behind AI is to alter or improve the way work is being performed or how services are rendered. In other words, AI — which represents intelligence demonstrated by machines — seeks to help both individuals and companies manage time adequately and increase productivity by ensuring that work is executed at the fastest possible time, effectively and efficiently.
Virtually all spheres of life have been invaded by AI and the blockchain and crypto industry is no exception. The growing intersection of AI and blockchain is expected to cause a paradigm shift in the crypto industry with supercharged blockchain networks, elevated smart contract execution, and the creation of more fluid and responsive smart contracts among the top benefits.
Beyond these, the impact of AI can be seen in the aspect of crypto trading. But how and what are the implications?
AI and Crypto Trading
The buying and selling of crypto assets such as Bitcoin (BTC) and Ether (ETH) to make profits has become very popular in the present times. Investors often rely on public sentiment, personal research, biases and analysis to enter and exit the crypto market.
All of these manual approaches which encompass gathering, cleaning, processing and analyzing large volumes of unstructured data are not completely efficient when it comes to discovering profitable investment opportunities and accurate buy or sell signals. This is where AI is expected to flourish.
Notably, AI has made incredible strides in natural language processing (NLP), machine learning (ML) and data analysis. Accordingly, it is believed that these intelligent-based systems can help crypto traders make informed and more profitable investment decisions considering that AI cannot be biased or emotional like humans.
In addition, the use of AI can make trading more accessible to a wider range of people by providing tools that are easy to use and understand.
Let's consider some ways AI can change the crypto trading landscape.
Improved and faster decision-making
Speed is among the top benefits of using AI for crypto trading given that successful trading is highly time-sensitive. Notably, AI software can scrape the internet in search of information at a very fast rate.
Beyond that, it can process data and make decisions at a speed that is impossible for humans to contest. Leveraging this AI's ability, crypto traders can react quickly to market changes and capitalize on opportunities that would otherwise be missed.
More so, AI algorithms can help investors make more accurate predictions of market trends and better investment decisions as they can always analyze vast amounts of data, identifying patterns and trends that are not readily noticeable to humans.
This doesn't mean trading would become a walk in the park with the help of AI. Making effective investment decisions today still requires extensive knowledge, expertise, and a human touch. As a result, combining AI with other reliable research tools would be the ideal approach.
Improved market analysis
Successful traders would always say that profitable trades come from verified historical patterns. This is why an adequate and accurate market analysis is crucial for profitability in crypto trading.
Crypto traders can always make mistakes in their market analysis given that they can only process limited data at a time coupled with their personal biases.
But AI's machine-learning capabilities allow its systems to collect and accurately analyze market data without any bias or emotional interference. Also, these intelligent-based systems can alter their analysis sharply when exposed to fresh data. Unlike humans, AI can easily identify and interpret complicated chart patterns.
In what is called sentiment analysis, AI algorithms can equally analyze news, social media platforms and other sources to decode the market sentiment, helping traders to navigate the murky waters of the crypto market.
Nonetheless, AI and machine learning models are not infallible and can be subject to incorrect assumptions. The unpredictable and highly volatile nature of the crypto market can also make it difficult for AI models to accurately predict future trends. Therefore, traders need to use AI as a tool to complement their own analysis and decision-making process, rather than relying solely on AI-based trading systems.
Risk and Portfolio Management
With AI, crypto traders can mitigate their risk exposure, helping them to avoid losses and make more informed investment decisions. This is so because AI systems can identify potential threats, such as they can warn traders in advance.
Portfolio management has been another huge concern for crypto investors. AI can be useful in taking these burdens away as the technology can be used to automate functions related to management, freeing up traders' time to focus on other tasks.
Overall, it is essential to note that AI is not a magic solution, as its implementation regarding crypto trading requires careful planning and monitoring. While many developments such as AI are being onboarded to enhance the experience for market participants, it is important to embrace them with caution as they come with many associated risks.