Artificial Intelligence (AI) has been making waves across various industries, and the cryptocurrency trading sector is no exception. According to a PWC report, AI could contribute a whopping $15.7 billion to the global economy by 2030. Simultaneously, the crypto industry's revenue could reach an astounding $1.1 trillion by the same year, as per research conducted by GlobalData.
The fusion of these two industries could be revolutionary, with many investors already leveraging AI tools to aid their crypto trades. Here are five lessons that AI traders have shared with us.
**Crypto Trading Is a “Confined Learning”**
Daniel Guan, the CIO at Kvants AI, a decentralised asset management platform, emphasises that cryptocurrency trading is a “confined learning.” AI, when used for crypto trading, tries to understand the token's movement and how a user can benefit from it. It learns all the token prices in crypto, altered financial instruments, prices in the traditional world, and all sorts of macroeconomic news. This learning helps generate models that predict price movements and then goes trading.
Karlis O, CEO and co-founder of Valio, added that large language models (LLMs) like ChatGPT could be instrumental in helping investors understand something they may not be too familiar with.
**AI Helps With Spotting Trends**
AI's ability to analyse vast amounts of data in significantly short amounts of time is a boon for crypto traders. It assists in spotting patterns and trends in the market that human traders may overlook due to cognitive biases. This leads to more informed judgments supported by data, which eventually leads to better outcomes from trading.
**Crypto Trading Is 24/7**
Cryptocurrencies trade 24/7, unlike traditional markets. This can be tricky as no trader can 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. This is where AI comes in, helping investors monitor the crypto market round the clock.
**Traders Have to React Fast to Market Trends**
The volatile nature of cryptocurrency markets means that crypto traders must be quick in making important decisions. AI and machine learning are suitable for this world as they can provide swift reactions and an adaptive learning environment. Whenever something new happens to a cryptocurrency’s price, traders can always learn something and try to react to it.
**Risk Tolerance Is Vital**
AI’s ability to quickly analyse big data sets also has another major advantage – the ability to spot and potentially mitigate risks. AI traders can implement particular risk management strategies that can help them avoid significant losses.
In conclusion, the integration of AI in crypto trading is not just a trend, but a necessity. It offers numerous benefits, from spotting trends to managing risks, making it an indispensable tool in the volatile world of cryptocurrency trading. As we move towards a more digital future, the role of AI in crypto trading is only set to increase.