Cryptocurrency trading has become an industry with a value of over 100 billion dollars, one that consistently generates returns despite the impact of outside market factors such as the COVID-19 pandemic.
Despite the undeniable popularity of cryptocurrency trading, investing in cryptocurrencies is not without its difficulties. Most people who have heard of cryptocurrencies, and some of those who have invested their money, only understand them vaguely as investments.
Cryptocurrency trading requires knowledge and experience. Unlike traditional financial markets, cryptocurrency markets are open 24/5/365, so traders need to constantly monitor charts in order not to miss out on a good chance for buying or selling.
Fortunately, there are technology tools available that can help traders from both new and experienced backgrounds understand the crypto market. In this article, we’re going to take a closer look at one tool that is redefining crypto trading: artificial intelligence (AI ).
How AI is Helping Crypto Traders
AI tools are now used in the cryptocurrency space, creating interesting synergies between blockchain technology and artificial intelligence.
AI can take all the historical data of a particular asset, such as its daily price over the past year or the number of times it was mentioned on various social media platforms, and uses that information to make predictions about its potential future price trends.
The accuracy of the prediction depends on several factors, including the quantity and quality of data, the sophistication of mathematical models used, and how much computational power was devoted to solving the problem.
Advantages of Using AI
The advantages of using AI for crypto trading include:
- Blockchain Data: AI has the ability to analyze large amounts of blockchain data, which includes historic market data, articles, forums, and social media comments. Data analytics can be used by investors to predict and forecast price changes in the market and make well-informed decisions.
- Learning ability: Sophisticated AI systems can use neural networks to predict the future of the cryptocurrency market. AI systems can monitor currency fluctuations and detect patterns, which are then used to make educated predictions for future changes.
- Accuracy: If fed enough quality information, AI systems can achieve a high degree of accuracy
- Market sentiment analysis: Using AI, sentiment analysis analyzes the sentiments or opinions people express about a particular topic. Tools can analyze different signs to determine whether the sentiment for a particular currency is positive or negative affecting price fluctuations.
AI and Crypto Trading Bots
Crypto trading bots typically need a manual setup by the user. Traders can use conventional trading strategies but they bear the burden of coming up with a successful setup. That’s one reason most traders have trouble finding a good long-term strategy without losing some of their money first.
Combining AI with trading bots allows traders to enjoy a higher level of trading performance without having to study different parameters and strategies. An AI bot can perform big-data analysis and use adaptive algorithms for automated investment and profit maximization. Combining AI and trading bots is an emerging concept in the crypto space. However, there are already a number of companies offering AI-optimized trading bot solutions.
Cryptocurrency trading is one of the fastest-growing sectors of the entire cryptocurrency market, and using technology for automating the process is popular among cryptocurrency traders and enthusiasts. Both new and experienced traders can benefit from using AI and crypto trading bots for technical and fundamental analysis and profitably trade assets on cryptocurrency exchanges.
