The capabilities of artificial intelligence (AI) have taken the world by storm, and the trading industry is no exception, especially in the cryptocurrency world.
According to a PWC report, by 2030, AI has the potential to contribute $15.7 billion to the global economy. Meanwhile, the revenue from the crypto industry could reach $1.1 trillion by that same year, research conducted by GlobalData showed.
Without a doubt, merging these two industries could become groundbreaking, and many investors are already using a number of AI tools at their disposal to help them conduct their crypto trades.
Here are the five lessons AI traders have shared with us.
Crypto Trading Is a “Confined Learning”
Daniel Guan, the CIO at Kvants AI, a decentralized asset management platform that offers access to AI-enabled trading strategies, told Technopedia that one of the critical lessons crypto traders should keep in mind is that cryptocurrency trading is a “confined learning.”
According to Guan, what essentially AI is doing when used for crypto trading purposes is that it is trying to understand how the token is moving and how a particular user can benefit from that.
What this essentially means is that in order for a crypto trader to succeed in their job, they must first understand how the cryptocurrency they are trading is moving, what are some key factors that are affecting its price, and how could the cryptocurrency react to any upcoming news.
Karlis O (the last name redacted due to privacy concerns), CEO and co-founder of Valio, added that large language models (LLMs) in the likes of ChatGPT could become great tools in helping investors form a basic understanding of something they may not be too familiar with.
AI Helps With Spotting Trends
One of the biggest upsides of using AI when trading crypto is the technology’s ability to analyze vast amounts of data in significantly short amounts of time. This skill helps AI crypto traders with decision-making in cryptocurrency trading, Vikas Kaushin, the CEO of TechAhead, told Technopedia.
Karlis added that the majority of AI tools used when trading crypto is specifically tuned to focus on market signals, whether those are analyzing Twitter data, looking at the semantics of what is going on in the market, or analyzing heat maps of the sentiment.
Crypto Trading Is 24/7
Unlike traditional markets, cryptocurrencies are trading 24/7, which could potentially be one of their trickiest aspects. No trader is able to stay up for 24 hours, seven days a week, meaning that many could potentially lose on great buy or sell opportunities during times when they are unavailable.
Kvants AI’s Guan noted this is why they have developed an AI-helping tool that aids investors with monitoring the crypto market 24/7.
Traders Have to React Fast to Market Trends
It is a truth universally acknowledged that cryptocurrency markets are highly volatile, which means that crypto traders must be quick when it comes to making important decisions.
Relaying his past experience in traditional finance, Guan noted that if crypto traders rely on some traditional financial strategies, their judgment may not be reactive enough for the volatile crypto market.
Karlis added that large language models can also be useful here as they serve as an advantage in the velocity of comprehending information.
“Of course, you have to factor in the level of expected error, but effectively, you can think of it as doing diligence faster.”
Risk Tolerance Is Vital
AI’s ability to quickly analyze big data sets has another major pro – the ability to spot and potentially mitigate risks.
TechAhead’s Kaushin explained:
Moreover, Guan said that risk management is a key issue in the financial industry and should be a key priority for crypto investors, too, especially because of the high volatility that the industry experiences.
The Bottom Line
Overall, trading crypto using AI could become a fun experience; however, before one starts incorporating AI into their crypto trading strategies, they must build a solid basis in both the fundamentals of crypto trading and the technologies associated with AI, Kaushin stressed.
Karlis added:
AI and crypto technologies are constantly evolving, so staying at the top of your game and adjusting your crypto trading strategy is very important for every trader.
