AI Technology Revolutionizes Cryptocurrency Trading

By AsianMarketCap Official on The Capital

AsianMarketCap Official
The Dark Side


New and advanced technological innovations have brought massive revolutionary changes in all aspects of the world. Any industry would guarantee that AI will have been hailed as the next big thing. The cryptocurrency sphere is no different.

AI is to technology what blockchain is to the cryptocurrency industry. Startups have been so keen to cash in on the AI craze. Hence, those that are being involved with AI attract 15–50% more funding than other technology firms.

In the traditional financial sector like the stock market, AI is well-established and has already made its mark. The evidence that AI can out-trade humans in this domain is compelling. A recent study showed that computers provided significantly better results than those managed by people. But what about in the cryptocurrency markets? What impact will AI have on the cryptocurrency industry? Will its rise ultimately render human traders obsolete?

With the development of AI-based tools that can stimulate trillions of trading days, algorithmic trading powered by AI will inevitably prevail. Data-based decision-making eliminates the noise that can cloud people’s judgment, preventing them from acting rationally.

Computers that have been trained using Machine Learning (ML) will consistently derive more accurate insights than humans. This theory has been proven and it’s now being applied to the cryptocurrency sphere with equally convincing results.

What is AI?

Artificial Intelligence is about building machines that are intelligent and capable enough to carry out tasks that naturally need human input and intelligence. Today, AI and Machine Learning are bringing drastic changes to all parts of the socio-economic world and cryptocurrency market is among them.

Cryptocurrency is the new kid on the finance block. Since the 2017 crypto-boom, millions have and continue to hop into the cryptocurrency bandwagon. Artificial Intelligence has a huge potential to impact cryptocurrency investing in significant ways.

Forecast and Predictions

Cryptocurrency market is volatile and to combat the volatility of cryptocurrency valuations, developers have created models based on neural networks that are becoming increasingly accurate at making predictions. They can analyze the prevailing cryptocurrency exchange rates to come up with market forecasts by the minute. The significance of the forecast depends on the amount of computation power, the sophistication of mathematical models employed and the quality and quantity of data analyzed.

High-Frequency Trading

HFT or High-Frequency Trading is a complex algorithmic trading in which large numbers of orders are executed within seconds. HFT by humans alone is not possible. That’s why we need algorithms that the computers can execute for us and place bids. The goal of high-frequency trading is to capitalize on price spikes. This program trading platform uses the power of AI to analyze technical indicators across multiple markets and execute orders across various exchanges in response to market-moving trades. Traders can custom design a dataset of parameters they want the software to base its decision making on.

Sentiment Analysis

Sentiment analysis, also known as opinion mining is a sub-field of Natural Language Processing (NLP) that tries to identify and extracts opinions from a given text. It involves analyzing data from blogs, articles, social media, stock message boards, video transcripts, and many other sources to understand the market sentiments on a certain topic. Emotion can be the biggest asset or handicap for any trader and its influence on investment decisions is undeniable. Machine Learning and AI have made it possible to analyze text from various sources with a lot more accuracy and precision. By analyzing these emotions, AI can direct investments toward profitable trends.

Fundamental analysis

Stocks and cryptocurrency are similar in many ways; one being the use of fundamental analysis in making trading decisions. Similar to stock, coin valuation involves gauging qualitative and quantitative factors. AI is faster and more accurate at fundamental analysis compared to human traders. AI models can find patterns within data that are predictive of future stock performance. This methodology avoids the biases that humans may have when analyzing.

Final thoughts

To gain a competitive edge, investors have always been quick to adopt the latest technologies and AI is no exception. While there are other ways which could help the average investor analyze the wild crypto-market, it takes the power of AI to navigate these murky waters profitably. Despite the benefits of using AI to analyze the markets, it’s important to understand that AI is not an oracle and it won’t be right every time. Artificial Intelligence can be an invaluable tool for analysis and investing yet it is just one tool in a larger toolbox of investing and trading in general.