How AI is Changing Crypto Trading

Mark Brown

Cryptocurrencies have only been around for a little over a decade, but they have already established a solid footprint in the financial world. When the first cryptocurrency, Bitcoin, was launched in 2009, it was hailed as the future of money. This marked the first generation of digital money powered by revolutionary blockchain technology. The underlying crypto technology has evolved and we are now in its third generation where the decentralized architecture allows for infinite scalability, zero fees and instant transactions. But technology is not the only area we have witnessed evolution. Cryptocurrencies have also evolved to become digital stores of value, with their wild price volatility delivering endless profit opportunities for investors. This is where AI (artificial intelligence) takes center stage.

With AI, crypto trading systems are able to analyse huge data sets, perform accurate trade analyses, generate trading signals and place orders at optimal price levels. AI trading goes beyond mere HFT (high-frequency trading) where trading opportunities are exploited at a lightning pace based on statistical and technical methods. AI is able to learn, in real-time, the prevailing market conditions and sentiment, as well as develop new trade patterns and execute trades that have the best profit potential with the least market risk exposure.


Cryptocurrency Market Volatility

Volatility in cryptocurrencies has been an inherent and constant feature. Early investors in the space witnessed this as the price of Bitcoin soared to almost $20,000 from only a few cents to the dollar, delivering a percentage return on investment in the millions in less than a decade. But that is not the whole story. There have similarly been sudden price tumbles and numerous bubble bursts that have caught out some investors, causing massive losses. There are many factors that guarantee volatility will remain a mainstay in the cryptocurrency market. Cryptocurrencies are 100% digital and backed by no physical asset, with the prices determined purely by supply and demand forces. The underlying blockchain technology is still developing while the entire market is only a few years old, despite the hype it generates in the investment community. There is immense media coverage of the industry which has also attracted huge speculative capital. This makes it extremely hard to accurately and consistently predict the future price action of any crypto coin or token. But not for AI! AI is able to comb through millions of data and through machine learning, it is able to make the best AI trading decisions in the market at all times.


How AI Helps in Trading Cryptocurrencies

Trading automation is proving to be more than a prudent decision in cryptocurrency trading, it is now simply necessary. Trading bots represent the basic form of automation. All trading decisions are programmed to be executed in the market mechanically: from the underlying trading strategy, entry price and stake amount, to stop loss placement and the take profit price. But even for this basic automation, investors are able to realise huge benefits. Order execution reaction time is greatly improved and trading strategies are applied at their optimal performance levels. There is also no danger of inhibiting human emotions interfering with objective trading activity. And when AI is integrated with trading bots, there are even more possibilities.

AI techniques, such as Machine Learning, Robotic Process Automation (RPA), Machine Vision and Natural Language Processing (NLP), can help investors to take maximum advantage of lucrative opportunities in the cryptocurrency market with as minimal risk as possible. Using RPA, AI integrated bots are able to automate all aspects of trading activity, no matter the volume or frequency involved. In NLP, the abstract and unstructured data from human languages is transformed into a language that can be well understood and deciphered by computers. This is particularly useful when trying to gauge market sentiment, where bots have to fetch data, process it, score it, and then generate a tradable model. There are numerous sources of pre-existing as well as incoming crypto data, but NLP ensures that only reliable ones are used to develop a solid fundamental trading strategy.


Machine Vision allows for the capturing and analysis of graphical information. In trading, this can be great for pattern recognition. AI-integrated bots are able to identify chart or price patterns as well as trends with greater accuracy and precision. The bots can also detect new patterns, test them and also verify their authenticity in real-time. And then there is Machine Learning, where trading algorithms are simply not just designed to make trading decisions based on available and incoming data, but also to learn and improve on it. The crypto market as well as the underlying blockchain technology is now a global phenomenon, and numerous data can influence the prices of various coins and tokens at any given time. Granted, the reaction to different types of data can never be authoritatively determined, but through Machine Learning, bots are able to enhance predictive analysis and always make trading decisions that increase the possibility of positive reward with as minimal risk exposure as possible.

Overall, the possibilities of AI in crypto trading are limitless. AI presents a variety of tools that massively enhances predictive analyses. Beyond utilising available data and information, AI is also able to learn and explore new trends, patterns and correlations so as to expose investors to opportunities that they would otherwise have never been able to detect. Essentially, AI cryptocurrency trading bots allow logic to be applied to the trading environment efficiently, accurately and consistently. This can only translate into much higher profit ceilings for investors.

The Benefits of Trading Cryptocurrencies with AI

Here is why you should trade cryptocurrencies with AI-integrated bots:

  • Automation. Bots automate trading strategies and systems to ensure that they are applied at their best performance levels. Automation also ensures that subjective emotions such as fear, greed and overconfidence are kept out of objective trading activity.
  • Speed and Accuracy. Bots trade crypto markets faster and more accurately than any person can manage manually. Lucrative trading opportunities are scanned for across multiple coins and tokens, with the best of them exploited with laser precision for maximum profits.
  • Backtesting and Forward Testing. AI bots are able to crunch massive historical data within seconds to allow investors to perform quick backtesting on various strategies. AI also allows for forward testing of new and existing strategies. This can help investors to quickly tweak or optimise strategies so as to boost profitability.
  • Strategy Diversification. AI allows investors to apply multiple trading strategies at the same time with great efficiency. Bots are able to trade different strategies on different timeframes as well as execute different types of entry and exit orders so as to boost profitability and reduce risk in different market conditions. This is done with complete precision and objectivity at all times.
  • Time Saving. Time is a natural constraint for human beings. Trading bots ensure that investors are able to free their time and focus on only what matters; how to improve their trading activity. Trading bots can run round the clock without losing any efficiency at all.

AI is basically a technology that can ‘think and act logically’. This is perfect for the fast and dynamic crypto market that demands speed and efficiency. It is therefore prudent for investors to learn more about how AI can help them enhance the profitability of their trading software.


What the Future Holds

Artificial Intelligence is the perfect disruptor of current and future crypto trading activity. There are numerous blockchain projects that spring up by the day and while most of them may well fail to achieve their objectives, there are some that will no doubt deliver abnormal returns. AI cryptocurrency trading bots are able to sieve out the best coins and tokens for investors to consider backing. Financial success is hinged on predictive analytics, which is exactly the environment AI is tailor-made for. The crypto market has always generated buzz around the globe and there are numerous streaming sites that deliver updates and events in real-time. AI will be able to explain the bits and pieces of unstructured data and also learn from all the millions of historical order logs and price action information and figure out the best strategies to be implemented at any given time. Cryptocurrency markets will always be wild and dynamic, but AI will be able to handle all the challenges and present to investors the best possibility of consistent, huge rewards in a risky financial environment.


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