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5 Benefits of using AI in the Cryptocurrency Market

  • Ashesh Anand
  • Mar 23, 2022
5 Benefits of using AI in the Cryptocurrency Market title banner

Cryptocurrencies are a fascinating phenomenon in today's world. Digital coins, which have swiftly gained popularity and become extremely popular, continue to be a highly profitable investment tool, capable of earning massive returns on cryptocurrency exchanges or when investing in these assets over the long run. 

 

Investing in cryptocurrencies, despite their rapid growth in popularity, comes with several problems, including technological difficulties. Here are four ways Artificial Intelligence (AI) can be used for cryptocurrency trading, thanks to the rise of AI and the proliferation of AI use cases across the financial industry.

 

Every day, the number of significant players in crypto grows, including hedge funds, banks, pension funds, and family offices. These firms frequently use trading models that are far more complex than those used by ordinary traders. AI is now available to everyone, not just the large players.

 

Understanding and implementing bitcoin investing requires a great deal of skill and patience. Investors and traders are increasingly turning to AI and machine learning to help them make sense of investing as more tech-driven tools become available. 

 

As institutional investors become more interested in crypto, AI and machine learning are proving to be useful. Because cryptocurrencies are based on blockchain technology, AI can work in tandem with blockchain to solve many of the problems.

 

Watch this | Blockchain + AI = Decentralized Artificial Intelligence




 

What Makes Blockchain and AI a Good Match?

 

Many people are seeking to use Machine Learning, a type of AI, to finance their businesses. AI's strong suit is pattern recognition. Models can be trained to tell the difference between an apple and a pear, for example. 

 

So, if AI can recognize patterns in price data (the chart), it can forecast which way the price will move next. You can now buy and profit because the AI has detected the pattern.

 

AI's advancement is predicted to have a significant impact on the bitcoin market's future growth. Over the last few years, the crypto business has experienced significant growth, bringing a large number of new clients from all over the world.

 

The fact that it is so easy for newbies to get started in the crypto sector is one of the reasons why the market is growing so popular. It is no longer necessary for traders to have extensive knowledge in the crypto trading market in order to earn from it.

 

There are a slew of cryptocurrency exchanges on the market that allow traders to take advantage of algorithmic trading. This is a fantastic deal for individuals who don't have enough time to keep an eye on the market or just don't have enough understanding and experience with cryptocurrency trading.

 

AI-powered cryptocurrency markets are open 24 hours a day, seven days a week, implying that there are active traders monitoring crypto values at all times. 

 

This generates a vast amount of data for AI to analyze in order to forecast future prices based on historical data (gathering and analyzing historical market pricing). As a result, crypto and AI-assisted price forecasts are more accurate and faster since they eliminate the risk of human error during calculation.

 

Also Read | Understanding the concept of Crypto-Banking

 

 

Benefits of Using AI in Cryptocurrency Trading

 

The following are the primary benefits of employing AI for cryptocurrency trading:

 

  1. Filter through enormous amounts of data

 

AI can sift through a lot of blockchain data, including historical market data, articles, forums, and even social media comments. Investors can utilize data analytics to predict and forecast market price-altering events and make better decisions.

 

 

  1. Cryptocurrency Monetization Insights

 

Cryptocurrency traders rely significantly on a variety of indications. However, given the prevalence of unstructured data in the digital world, manually producing trustworthy signals may be unfeasible. Large amounts of data must be clean, relevant, and correct before being analyzed for investing insights. 

 

AI can be used by data scientists and engineers to create strategies for traders to obtain relevant and clean data on a platform. NLP techniques can be used to classify and extract data based on criteria like currency name, document kind, currency founder, and more. 

 

Data scientists can utilize AI to give accurate trading information in a dashboard or interface that non-technical traders or investors can understand.

 

 

  1. Ability to Learn

 

Neural networks can be used by sophisticated AI to make predictions about the crypto market's behavior. AI systems can track and compare exchange rate swings, as well as find patterns, and use this data to generate accurate forecasts about future changes.

 

 

  1. Identifying Parties with whom to Strike Deals

 

The lack of liquidity in the bitcoin market is one of the issues. The high volatility of digital currencies makes them unsuitable for corporate payments. High fees from exchanges and banks frequently compensate for the mismatch between supply and demand. 

 

Platforms like TradeConnect, which uses machine-learning technology, are being employed to fix the problem. It employs a side-matching system to assist customers in locating the appropriate broker and bank, allowing them to deal directly and pay minimal fees.

 

 

  1. Analysis of the Cryptocurrency Market Sentiment

 

Sentiment analysis is the application of artificial intelligence (AI) and natural language processing to examine people's feelings or thoughts on a given issue. When it comes to cryptocurrency investing, a good overall attitude on a digital currency can indicate price increases, while a negative overall sentiment can anticipate price decreases. 

 

Large amounts of varied data must be collected, processed, and analyzed in order to determine the sentiment of the bitcoin market. This includes news, blogs, articles, forums, social media posts, stock message boards, and even comments on them. 

 

Large volumes of data from the internet, as well as blockchain data, can be processed at scale using AI, and the sentiment—whether negative, neutral, or positive—can be promptly analyzed. 

 

AI and machine learning can detect market manipulations by monitoring multiple signals and looking for unexpected trends in sentiment indicators. Investors will know what to do with the insights discovered after an emotion has been associated with the data.

 

Also Read | What is the Future of Cryptocurrency?


 

In the domain of crypto, the future of AI is bright

 

AI, according to many experts, will become much more effective in the future. Technology is rapidly evolving and updating, and it is now capable of accomplishing even more than it was a year ago. 

 

AI is capable of continuously monitoring market price fluctuations, ensuring that if there is a movement in the market that could result in a profit for traders, the automated trading bot will profit for you.

 

AI is used by more people than just cryptocurrency traders. Artificial intelligence and its future have piqued the curiosity of participants and representatives from a variety of businesses, with claims that its advancement will benefit people from all walks of life.

 

Watch this | How A.I. Traders Will Dominate Hedge Fund Industry | Marshall Chang 




 

Conclusion

 

The broad deployment of AI technologies is constrained by several factors. Because the bitcoin market is relatively new compared to the regular stock market, and AI understanding is sometimes restricted by the quantity of information that mankind has, there is a dearth of information. Overall, the intersection between blockchain technology with AI is largely uncharted territory. 

 

The upscale execution of their convergence is fairly tough, which is one of the main reasons why we have yet to witness a commercialized joint adoption of the Blockchain system and AI.

 

Many organizations, although having experimented with AI, are wary of combining Blockchain with AI. It's important to understand that the correlation between a cryptobot's efficiency and its true value determines its quality. Any bot used to trade bitcoins on an exchange must be reliable. 

 

They're still in the early phases of testing the waters for AI and Blockchain in isolation. The merger of the two technologies has received its fair share of scholarly interest as they continue to sort it out for suitable public distribution.

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