With the recent incidents of Bitcoin (BTC) reaching a session high of $72,720 as of Monday evening (March 11, 2024) and then falling back to $59,700, the unpredictability of the cryptocurrency market seems to be a never-ending saga. Experts believe the incorporation of predictive artificial intelligence (AI) algorithms, can analyse and identify cryptocurrency trading patterns. This can eventually help a user or trader to make decisions or predictions based on AI-based insights. AI-based trading systems can also incorporate machine learning (ML) algorithms, allowing them to learn and adapt from past trading experiences. “With predictive AI, technical analysis in cryptocurrency can become more accurate and efficient, helping traders make better decisions. One major benefit of AI in cryptocurrency trading is its ability to swiftly handle and analyse vast amounts of real-time data. Since the cryptocurrency market operates non-stop and prices change quickly, being able to process this data rapidly is crucial for traders to seize good opportunities,” Vivek Gupta, CTO, CoinDCX, a cryptocurrency trading platform, told FE-TransformX.
Crypto trading market
The market for AI cryptocurrency trading bots was estimated to be worth $21.69 million in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 37.2% to reach $145.27 million by 2029, as per insights from Valuates Reports, a market research platform. For example, Cryptohopper is a platform that allows users to copy the trades of successful traders automatically. Users can select a trader of their choice and mimic their habits automatically through their account and benefit from those experiences.
Experts believe that predictive AI can benefit cryptocurrency traders and their decision-making as the ‘fear’ and ‘greed’ factor which so often affects token prices will start having a lesser impact. Psychological inhibitions about resistance levels prompting sell-offs and price dips can also be avoided. Advanced machine learning algorithms can identify patterns indicative of potential future market trends across different time frames, ranging from days to minutes which could take a lot of man-hours without the guarantee of accuracy or precision. AI can benefit traders by predicting market trends based on previous patterns to fulfil transactions when predetermined targets are met. “ One of AI’s key advantages lies in its elimination of emotional biases, as it relies on data and algorithms, freeing it from the psychological influences that affect human traders. Through continuous processing of large volumes of data, AI enables systems to adapt and enhance their predictive abilities over time,” Rajagopal Menon, vice president, WazirX, a cryptocurrency trading platform, explained.
When cryptocurrency trading meets AI
Industry experts believe that businesses can also meaningfully integrate the power of AI to deliver more refined and targeted products to its users, drawing on a deep understanding of macroeconomic trends, asset dynamics, and user preferences, among others. Additionally, it is believed that intelligent ecosystems can also be developed providing personalised investment advice and AI-driven virtual assistance. “Once accomplished, predictive AI can be a game-changer for enhanced decision-making, improving profitability, and market performance. AI can equip investors and traders with an edge that is invaluable in navigating the complexities of the market,” Vikram Subburaj, CEO, Giottus, a cryptocurrency platform, highlighted.
Critics argue that the integration of predictive AI in cryptocurrency trading is a double-edged sword, presenting both lucrative opportunities and potential pitfalls. While predictive AI-driven analysis holds promise for optimising trading strategies and boosting profitability, a cautious approach is imperative. Experts believe that traders must remain vigilant against algorithmic biases, technical glitches, and unforeseen market dynamics that could undermine the reliability of AI predictions. “The complexity of certain AI models may obscure their rationale, posing challenges for traders in understanding the underlying mechanisms. AI’s potential to mitigate emotional biases and provide detailed analytics for decision-making is undeniable. Nevertheless, it’s essential to temper expectations regarding the precision of predictions. The cryptocurrency market is notoriously unpredictable, influenced by a myriad of factors such as regulatory shifts, news events, and speculative activity,” Sunil Gopinath, CEO, Rakuten India, a global product and innovation centre for Rakuten Group, Inc, concluded.
