- AI intersects with crypto trading in making real-time decisions and accurate predictions.
- The merits of AI are to help minimize loss and make objective decisions.
- Associated risks, complexity, and cyber-attacks are some of the demerits of using AI for crypto trading.
Artificial intelligence (AI) has taken over every facet, from movie recommendations to research works, social media, and the crypto ecosystem.
Significantly, AI tools are gaining traction in the crypto ecosystem and financial industry.
The increasing traction has resulted in the introduction of numerous AI tools for crypto trading.
It is, therefore, essential to identify the rudiments of AI, how it intersects with crypto trading, and why traders should or should not rely on these tools.
How Crypto Trading and AI Are Related
The relationship or intersection between Crypto trading and Artificial Intelligence is to make the process easier and data-driven for cryptocurrency traders.
Instead of a trader doing the entire trading task, they deploy custom-built programs and bots to analyze the market, make predictions and conduct transactions.
Since most activities in crypto trading require real-time decisions, these artificial intelligence tools are programmed to respond faster and optimize the process.
Therefore, crypto trading and AI are related in making real-time decisions, largely accurate predictions and deploying unique trading strategies.
For instance, in arbitrage trading, you could lose your entire investment in a split second— if you slack off or are unavailable to make a real-time decision.
So using AI trading tools in arbitrage will help predict your response and make such a decision in your absence.
All AI tools work based on algorithms, i.e., they engage in predictions, analysis, and trading based on a pre-loaded format or equation.
The trader or programmer, therefore, pre-loads how they want the bots to work and the likely decisions to make at every step or scenario.
Understanding the impact of AI on crypto trading is crucial. So let’s consider the merits of AI working in cryptocurrency trading.
Merits of AI on Crypto Trading
- Speed and Efficiency
AI tools can process and analyze vast amounts of data in real-time. Moreover, these data analyses and predictions come with a high level of accuracy.
Most times, traders are at a cross-road and must make decisions in real-time.
These artificial intelligence tools are developed to analyze data, generate insight, and help cryptocurrency traders make informed decisions.
AI tools are programmed and run by instructions, devoid of human bias and emotions. So their decision, advice, and analysis are data-driven.
Unlike online platforms and industry players whose emotions or endorsements may sway, AI trading tools are objective and would make their predictions devoid of sentiment.
Demerits of AI on Crypto Trading
AI tools are usually made for expert traders that engage in difficult trading such as arbitrage.
As sophisticated as they may be, they require a human touch, and you need to understand how they work to avoid being stuck.
- Infallibility and Associated Risks
Over time, users of AI tools for trading may rely solely on them, but it’s important to remember that, like any technology, AI is not infallible.
From programming errors to hacking and other unforeseen risks, the crypto trading AIs can cause investment loss.
With speed, efficiency, and objectivity, AI can transform cryptocurrency trading. However, its complexity and other underlying risks might make it a no-go area.
Therefore, finding the right balance between these two to maximize the benefits and minimize the drawbacks might be critical to fully exploring the possibilities of AI.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information but will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.