Over the past few years, we have witnessed the expansion of artificial intelligence into global economic processes. AI technologies in one form or another have been around since the middle of the last century, but the real breakthrough came with the launch of the OpenAI chatbot ChatGPT at the end of 2022, a publicly available and an order of magnitude more advanced AI solution than any previously proposed. It immediately attracted the undivided attention of businesses, investors, tech enthusiasts and financiers, and had a major impact on the cryptocurrency and decentralized finance space. This led to a boom in AI tokens in early 2023, as well as the search for possible integrations with neural networks for crypto traders. The innovation has firmly entered the cryptocurrency sector, which, according to analysts, is on the cusp of an undeniable takeoff in 2024. Cryptocurrencies, blockchain, and artificial intelligence are the hottest technology trends. Today, the market perceives the active introduction of AI into the trading process or the creation of smart tokens as an inevitability rather than a probability.
Despite the fundamental differences between these trends, marketers and developers are actively discussing the advantages of combining these technologies.
In this article, we will consider methods of applying artificial intelligence in crypto trading, find out how artificial intelligence is useful in crypto asset management, as well as the prospects for the development of the AI concept in the context of the global market of digital assets.
What is artificial intelligence?
Artificial intelligence (AI) is a computer technology that allows machines to perform intellectual tasks that were previously only available to humans. To create it, the principles of the human brain are studied, cognitive processes are further analyzed, and intelligent software and systems are developed on the basis of the collected data.
AI systems work by combining massive amounts of data with intelligent iterative processing algorithms. These algorithms allow AI to learn from patterns and characteristics of the data being analyzed. After each cycle of information processing, the systеm tests and measures its performance and uses the results for further development.
AI is a broad term that summarizes various technologies, the basic of which are:
If we draw an analogy with a human, AI is like a brain, machine learning is one of the many ways of processing incoming data to solve problems, and neural networks are like an amalgamation of smaller, basic elements of the brain – neurons.
What is an AI-based cryptocurrency?
These are tokens that use artificial intelligence technologies in one way or another. They can be used to improve security, scalability, user experience, text creation, and investment protocols. AI is used to automate and improve the efficiency of analysis, forecasting and cryptocurrency trading processes. AI-powered cryptocurrency tokens can unlock access to AI-powered services.
Benefits of AI
Artificial intelligence and blockchain have their individual levels of development and interact with data in different ways. Their symbiosis will allow each technology to improve faster and reach the next level. Integrating machine learning and AI into blockchain optimizes the internal architecture of the underlying systеm, making it more efficient. Artificial intelligence can be used to create more complex decentralized applications (DApps), expanding the capabilities of blockchain technology. Machine learning in investments provides profitability prediction with minimal error. AI will drive the development of new cryptocurrencies with improved functionality and features.
Cryptocurrency trading with AI offers the benefits of automating cryptocurrency trading algorithms, analytics, and price prediction. Optimizing cryptocurrency trading with AI is also that AI systems can be an indispensable risk management tool in portfolio investing. Recently launched robo-advisors manage investment portfolios by selecting assets to achieve optimal returns. They do this by collecting and processing information, which they then use to analyze market sentiment and identify technical indicators. For example, cryptocurrency exchange Coinbase Global uses ChatGPT to analyze token risk. Before adding a new digital asset to its trading platform, Coinbase validates it using neural networks.
AI in crypto analysis and forecasting
The role of AI in predicting cryptocurrency prices can be invaluable: computational technologies based on its algorithms allow for comprehensive AI analysis of cryptocurrency markets using deep technical and fundamental analysis techniques based on large volumes of data. This will solve the existing problem of insufficient data required for correct and complete fundamental analysis, and create a solid foundation for the emergence of fully functional predictive models in crypto trading.
Advanced algorithms and machine learning capabilities in cryptocurrencies allow for the collection and processing of large amounts of data from multiple sources. By analyzing this information in real time, AI recognizes patterns, identifies anomalies and makes predictions. At the same time, artificial intelligence is able to constantly improve its strategies based on fresh data, thus creating new, adaptive AI strategies in cryptocurrencies that enable transactions with unprecedented speed and efficiency.
Optimizing trading strategies
AI-based crypto trading strategies will be significantly improved. First of all, this will affect the algorithmic trading strategy with its still imperfect and expensive tools based mainly on complex mathematical models.
Artificial intelligence can also check your trading strategy in seconds based on historical data, identify its strengths and weaknesses based on accurate indicators and suggest ways to improve it.
Crypto trading bots are becoming increasingly popular. Advanced сryptocurrency trading bots react instantly to market movements, and execute pre-programmed trades according to the required parameters around the clock.
Artificial intelligence and crypto trading security
AI enhances the security of cryptocurrency transactions through advanced mechanisms for detecting criminal and fraudulent schemes. Implementing machine learning algorithms to detect suspicious activity will ensure the security of the trading process and create identity management tools to prevent any fraudulent transactions.
In addition, by learning the patterns of fraudulent transactions, artificial intelligence is able to identify signs of manipulation, money laundering or other illegal activities.
Thus, AI will expand the possibilities of fighting cybercrime in the crypto market, complementing and evolving existing practices.
Neutralizing human emotions
Human emotions have a huge impact on trading results. AI negates the risks associated with emotions in cryptocurrency trading: fear and greed, impulsive decisions when a trader deviates from the chosen strategy due to short-term market fluctuations, and overconfidence.
Issues and challenges for AI in the cryptocurrency market
The crypto market is relatively young and poorly understood, which predetermines some of the factors that hinder the rapid and effective integration of AI technologies into it. Among them, the following can be highlighted:
Lack of data
Due to rapid development and lack of centralization, blockchain technologies and digital assets are among the areas that have been little researched. To fully test AI in real market conditions, the principles of decentralized networks need to be studied in depth, which is not yet possible. The cryptocurrency market is in a less favorable position in this respect compared to the stock market, which has been operating for almost 100 years and therefore has impressive historical data.
Limited computing power
Analyzing large amounts of data requires a robust computing infrastructure with a high computing power threshold. Insufficient computational resources limit the scalability of AI systems. For its part, increasing computing power requires more powerful processors, storage, and power consumption. Solving this problem will require the development of smaller, more energy-efficient computer systems and the utilization of renewable energy sources.
Lack of public trust
The development of AI has caused some skepticism and distrust among the public due to its rapid development and the debatable ethical side of the technology. Today, artificial intelligence is actively infiltrating all aspects of human life. Whether it’s creating images, videos or texts, developing programs, running a smart home or large corporations, AI is changing the way things are done everywhere.
Will artificial intelligence be able to surpass human intelligence? Will it not be used in military technology? Will it put the vast majority of the world’s population out of work? All of these questions are worrying humanity, and are causing some caution about AI.
How AI can change the future of the crypto market
Artificial intelligence has found wide application in the cryptocurrency market. Digital currencies perfectly combine blockchain technology with other emerging technologies. The integration of AI with cryptocurrencies holds great promise. Machine learning for crypto investors and traders promises a lot of benefits. Analysts expect that in addition to transforming individual elements of the process of circulation and trading of cryptocurrencies, AI will change the entire concept of the functioning of the cryptocurrency market from the point of view of increasing efficiency and security.
Thank you for your attention!
AnyExchange is a cryptocurrency exchanger that allows you to convert more than 100 currency pairs at the best exchange rate . The website offers both electronic and cash transactions, as well as money transfers worldwide.
