Artificial Intelligence vs Cryptocurrency: Hype and Reality
Needless to say, AI has been hailed as the next big thing in any industry. Well, the cryptocurrency sector is no different in that term.
But, beyond all the hype, what impact will AI have on the crypto industry? Could its rise consequently render human traders obsolete?
Companies Cashing in on the Artificial Intelligence Craze
What Artificial Intelligence is to the tech industry, Blockchain is to the crypto industry. Given that, startups articulated as being involved with AI attract 15 to 50% more funding than the other tech firms, it’s comprehensible why organizations are keen to cash in on the hype.
Unfortunately, it has served to drown out much of the real progress made in AI-based technologies.
In the traditional financial markets, Artificial Intelligence is well-established and has dependably made its mark. Fir AI to be effective, it requires vast troves of data for machine learning, and the stock market is optimal for this purpose, with TB (terabytes) of empirical data to draw upon.
The proof that AI can out-trade humans in this domain is obliging. According to a recent study conducted by Eurekahedge of 23 hedge funds using AI, the computers returned significantly better results than those managed by humans. But what about in the crypto markets?
AI Isn’t Just Evenly Distributed
Within the small crypto sector, there’s a premise that there are so many external factors for AI-based tools to have an edge. Now, that assessment will soon look archaic for the software development that can stimulate trillions of trading days, algorithmic trading powered by Artificial Intelligence will inevitably prevail.
Danil Myakin, the co-founder of Squilla Capital, said –
“Human bias is almost impossible to eliminate. People trade on their emotions, often unwittingly. Data-based decision-making eliminates the noise that can cloud people’s judgement, preventing them from acting rationally.”
Myakin added –
“Provided you have a large enough sample set, computers that have been trained using machine learning will consistently derive more accurate insights than humans. In recent years, this theory has been proven in every major financial market, and it’s now being applied to the crypto economy with equally convincing results.”
How AI Is Being Synchronized With Cryptosphere?
When it comes to automated trading, there are a number of areas in which AI has shown its worth. One of these is high-frequency trading (HFT) that relies on analysis of technical indicators throughout the multiple exchanges to respond to market-moving traders faster than the market.
For instance, if a trader was to place a large BTC buy order on Kraken, then HFT could help in order to be executed on another exchange instantly to capitalize on the price spike.
Not just that, Artificial Intelligence can also facilitate automated trading through API connected to leading crypto exchanges. Traders can choose the indicators they wish the software in order to base their decision-making on, like RSI and EMA, and the desired timeframe.
Then the AI will implement trades within these parameters. Now, traders will be able to backtest their settings, refine and optimize them.
As time goes on, AI’s performance should improve as the dataset at its disposal increases.