It isn’t a stretch to say that artificial intelligence (AI) has permanently transformed various industries, including retail, healthcare, education, entertainment, and much more. AI has empowered people in these industries to better analyze huge volumes of data that they now own as well as streamline current work processes for a high increase in productivity.
It then comes as no surprise that AI has found its way into the crypto world, seeing as mastery over data and oversight into productivity and returns on investment can also be especially helpful when it comes to trading. But how exactly is AI influencing the way crypto users trade, and will this continue to be a trend?
Here are some interesting insights to answer those questions and provide any interested investor or observer with a glimpse of the future of AI-driven crypto trading:
1) Algorithmic Trading Can Help Keep Up with Crypto’s Volatility
Cryptocurrency is known for its volatile nature, meaning that a coin’s price can fluctuate wildly at any time. This has made crypto trading difficult even for seasoned traders, as one can only anticipate so much about whether prices will go up or down based on past coin performance.
But AI is now able to provide traders with more extensive assistance in this regard through algorithmic trading. Because of AI’s capacity to analyze huge amounts of data, it can take into account past market performances and help traders discern patterns that will better guide their trading decisions.
For instance, an AI bot may warn you to hold your Monero (XMR) in your XMR wallet for the moment because it anticipates an upcoming market fluctuation. Likewise, it may also advise you to diversify your coin portfolio to spread out your risk. These suggestions can help you manage your assets from a more clear-headed perspective and come closer to your trading goals.
2) Crypto Trading Bots Enable More Objective Trading
Because of the volatility of cryptocurrency, it’s not uncommon for many crypto users to make trading decisions out of emotional bias. As you can imagine, this doesn’t always turn out to be for the best and can lead to either significant losses or missed opportunities.
Crypto trading bots may soon allow for a more objective trading experience overall, as they use algorithms to execute trades on an investor’s behalf. This could do a lot to mitigate emotional bias as well as human error and help traders execute decisions from a more objective and levelheaded position.
Today’s crypto trading bots can also be customized based on your personal trading preferences. Through an app or dashboard associated with the bot, you can specify key conditions for the bot to follow, such as trading only when an asset reaches a specific price point. It may even be possible to purchase templates from expert traders so that you can further improve the performance of your assets.
3) Automation Makes Trading More Efficient
One of the major benefits of AI is its ability to facilitate smart and efficient automation. This can also apply in crypto trading, as a trader may now automate various transactions by defining parameters beforehand for an AI bot to follow.
For instance, if you’re making use of the technology, you can set a stop-loss limit for the various coins in your portfolio and let AI take care of the actual trading. This can make it easier on your part to manage multiple crypto assets at the same time.
AI can also be used to automate crypto entry and exit strategies so that you can maximize your investment gains. Given how it’s already trained to monitor market performance, an AI bot can buy crypto when it notices that the coin’s price has gone lower than its average. Meanwhile, if you’re holding assets that are seemingly about to crash, the technology can help you plan ahead with regard to the best time to sell if you want to cut your losses while still making a profit.
4) Personalized Trading Recommendations Empower New Traders
Those who are hesitant about crypto trading may be able to attribute their nerves to the steep learning curve, given how much information one has to review to make a single trade. But AI can assist new crypto users by offering personalized investment recommendations based on the assets they own and their individual risk tolerance.
For instance, if your risk tolerance is low, an AI bot may suggest that you buy Ethereum or other established cryptocurrencies that have been around for longer, or that you invest first in stablecoins, which derive their value from another asset and are thus able to maintain more stable prices.
5) Risk Management Has Been Made Easier with AI
Risk is always going to be part of crypto trading, but that doesn’t mean you can’t be smart about it. AI technologies could make you even better at assessing and making better decisions based on your risk tolerance and appetite, for example by giving recommendations based on a coin’s historical performance and market trends and matching that information with your risk preferences.
If you’re someone who finds it difficult to keep up with cryptocurrency news and market sentiment, then rest assured that AI tools can still guide you when it comes to ensuring that the risks you take for each trade are well within their reasonable limits.
6) AI-Powered Security Features Make for Safer Trading
AI’s machine learning capabilities aren’t restricted to simply making market predictions. They can also be used to detect suspicious activities that may indicate fraudulent transactions. AI technologies can also be responsible for adding more layers of security in the user verification process during trading. One example is by adding biometric verification and helping traders thwart any attempts of unauthorized access to their accounts.
Put simply, AI comprises a powerful family of tools that can all be extremely useful for new and seasoned crypto traders alike, allowing them to better manage their portfolios and make smarter decisions related to risk.
The points listed in this article are just some of the major trends that may influence AI-driven crypto trading from here on out. In the near future, we’ll likely see even more features and tools powered by AI that can further improve the crypto trading experience.
