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Is the addition of AI the partnership the crypto sector needs?
Key Takeaways
- The AI hype train has well and truly left the station. But what happens if you add AI hype to crypto hype? Well, that hype train goes from steam powered locomotive to bullet train
- AI has the potential to fundamentally change the way the crypto universe works, and could solve a lot of the problems that have caused the sector to crash so badly in the past
- The key word is potential, and there are a lot of issues and potential drawbacks that need to be covered before we see mainstream adoption.
- But when it comes to AI powered crypto investing, the future is already here.
AI is taking over. Language bots like ChatGPT and AI image generators like Midjourney and Dall-E have shown the world what artificial intelligence is capable of. Tech companies are already scrambling to integrate it into their models. Within weeks of its launch, Microsoft is allegedly close to finalizing a $10bn deal with the creators.
Crypto has become a serious player in the world economy, despite its ups and downs. Some investors are pouring their entire portfolios into Bitcoin and Ethereum. Many are confident the crypto market will bounce back stronger than ever.
But AI and crypto, together? There’s an untapped potential we’re only just beginning to see put to use. It could transform both industries.
Download Q.ai today for access to AI-powered investment strategies.
The problem with crypto investing
Cryptocurrency doesn’t work like a traditional financial system. Crypto is volatile and prone to wild swings. We’ve seen more than one coin fold under the pressure of the economic downturn.
Many lament the lack of regulation, but crypto was born out of the 2008 recession’s greed and a desire to move away from the big banks. The problem? Fraud is rampant, crypto hackers are rife, and there’s no redress. Nearly $2bn of crypto was stolen by August last year. Many would never see that money returned.
All in all, crypto is developing an image problem when it comes to investors losing their money. AI could be the answer it’s looking for to tighten compliance without full regulation.
Why crypto and AI work so well together
AI’s strength lies in pattern recognition. Crypto’s ethos around decentralizing money is admirable, but currently flawed in execution. Here’s why we could see the beginning of a beautiful friendship forming.
Fraud detection
Crypto and the blockchain are all about anonymity. This makes it vulnerable to a range of scams, like market manipulation and outright theft. An AI algorithm trained to detect anomalies in transactions could help to prevent these rampant cash grabs.
Risk protection
A lot of people view crypto trading as riskier than most. It’s a fair assumption to make after last year, but AI has the potential to insulate investors from big losses with algorithmic trading.
AI can spot trends and make decisions faster than any human. When it comes to trading, this works well – when you add volatile crypto into the mix, it makes even more sense.
The average retail investor can use this to their advantage with packages of crypto trades, similar to ETFs. Not to mention that if crypto is perceived as less risky, more investors will join the party.
Automation
This is perhaps the biggest strength in introducing AI to crypto. So much of investing in crypto relies on your own understanding of the topic.
Gone would be the days of spending hours researching which crypto coins or tokens are best to buy. AI could decide everything for you, freeing up valuable time. It could also reduce any human errors in crypto data.
Where could we see AI go with crypto?
In a few years, we could see AI having a significant impact on the crypto industry. It has the potential to oversee risk and compliance, trading decisions and portfolios altogether. Here are some use cases of how AI could help investors in crypto.
Sentiment analysis
AI-powered natural language processing could recommend which crypto is best to buy (and with Q.ai, in some ways it already does). If it’s fed the right streams of data, like Twitter posts and news articles, the AI program would quickly get a sense of public sentiment towards certain currencies.
NLP could also help with price predictions, identifying any risks with a cryptocurrency, or trying to guess future growth based on the number of people talking about it. It’s a nifty AI tool that could soon dominate the crypto market.
Decentralized autonomous agents
If you know anything about Web3, then you’ve heard of DAOs. But you may not have heard about their cousin, DAAs. These agents are coded programs designed to make decisions.
How do these work in crypto? The DAA becomes a powerful AI-powered fund manager. There’s no human error or bias to worry about. You can sit back and relax while AI looks after your crypto portfolio.
Customer experience
We could see AI used to bring crypto into the mainstream once and for all. One of the main gateways stopping crypto right now is the technical language and understanding needed to make a transaction.
AI could create personalized advice tailored to risk tolerance, tailor marketing and comms around a user’s browsing habits, or provide curated lists of educational resources on crypto.
With the barrier to entry gone, it could only be a matter of time before crypto becomes as normalized as Visa or Mastercard.
Compliance and security
If financial institutions can pick up AI quickly enough, they too could harness its power to protect the banks. Compliance and anti-money laundering schemes would be easier to implement with AI monitoring signs of financial crime.
Real-time transaction systems monitored by AI could flag anything untoward, giving crypto an extra layer of security the banks are so often complaining is missing.
Are there any drawbacks?
The main concern is that AI is still in its infancy. We’re looking at years from now before it becomes a commercial and mainstream entity, ready to handle the demands of a multi-billion dollar market like crypto.
AI needs a lot of data to be trained. If there’s any bias whatsoever in that data, it can lead to problems. In the instance of crypto, we could see AI-powered market manipulation emerging in the market.
The darker side of Microsoft’s proposed big stake in ChatGPT is that it could take it off the market entirely. The technology could be fully owned by large companies, which then have a controlling factor in the crypto market. The power of AI being controlled in the hands of the few wouldn’t be promising for any innovation.
That being said, artificial intelligence crypto is an exciting new possibility that’s giving crypto traders a lot of hope. Considering how fast both of these industries are moving, it’s only a matter of time before we see AI and crypto make some big moves together.
AI and crypto investing is already here
We’ve talked a lot about what the future might look like for AI and crypto, but in many ways that future is already here. At Q.ai, we’re pioneering the use of AI in giving regular investors access to strategies and techniques usually only reserved for wealth hedge fund clients.
With our Crypto Kit, we’re putting this AI to work in the crypto realm.
This Kit works by having our AI predict the performance and volatility for the coming week, for a range of different crypto trusts. It then uses these predictions to find the optimal asset mix on a risk adjusted basis, and then automatically rebalances the portfolio accordingly.
It takes out the human element, and allows our AI to focus purely on the data it sees, rather than getting swept up in Reddit hype about Lambos and moon rockets.
Download Q.ai today for access to AI-powered investment strategies.
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