Artificial Intelligence — the most buzzed about technology in the world has already started leaving a mark on financial and investment markets. AI has offered a fundamental advantage to regular traders with algorithmic trading and better prediction models. At least that’s the rumor…
It does at least get the conversation started about what role, if any, does AI play in cryptocurrency markets? And…are there far more logical and ordinary places to go with that discussion?
It’s been said that there is really no effective way to predict what will happen to the value of cryptocurrencies for investors. All combinations of technical, fundamental, sentiment, news, trends, and other trade information have failed to correctly forecast the cryptocurrency prices.
The question that follows is whether or not an AI solution might be able to help investors get closer to the correct predictions.
The math behind trading is daunting. At least some rudimentary knowledge of each of these technical market indicators: Phi and Fibonacci numbers, Ermanometry Research, and classical and advanced Elliott Wave Theory are required in order to estimate some sort of market prediction.
(Hedging is an entirely different discussion…)
Traders also use fundamental analysis to evaluate the long-term decisions of a company, a stock, or the market as a whole. They’ll want to review all aspects of that market to assess its potential profit.
Analysts and investors who use technical data, on the other hand, investigate the data on market activity such as trends, support and resistance levels, and trade volume in order to chart patterns in market movement.
CoinGenius publishes Bitcoin’s prices weekly updates based on the analysis of technical indicators.
Some researchers have found success with large complicated models. These models use hundreds or thousands of variables to predict price fluctuations and Bitcoin’s price still manages to walk its own path.
Digitization is taking over the globe and it is getting harder for traders to catch up to the pace.
The placement of trades have become faster than instantaneous. In order to stay competitive, fast decision making is an absolute must. For artificial intelligence to show its magic in this sphere, it requires a huge chunk of data for the purposes of machine learning, and the stock market is ideal for this purpose, with terabytes of trading data to learn upon.
The results from research around the world have confirmed that neural trading systems fed with historical market data can produce superior information for the next trading day predictions, outperforming the buy-and-hold portfolio by more than 150% in just one year.
Artificial neural networks operate in a similar way to the basic functioning of the human brain. They take predictors, or inputs, and outputs (the daily price change of Bitcoin) and attempt to learn a pattern from all the data. The machine learns from the data with which it is fed and it continues to test its patterns to the optimal point beyond which it can’t be further tested.
The quality of the prediction depends on the quantity and quality of the data, the quality and sophistication of the mathematical models used, and the amount of computation power that can be dedicated to solving the problem.
AI based trading arrangements are in effect continually enhanced, and there is still time for them to accomplish flawlessness.
As of now, AI bots can give a great deal of important data. However, AI can’t substitute for human financial specialists completely. There is an element of “Collective Intelligence” needed (AI+Humans).
Automated trading is the next game AI has started in the cryptocurrency trading galaxies. It has introduced High Frequency Trading (HFT) which relies on analysis of technical indicators across multiple exchanges in order to respond to market-moving trades faster than the rest of the market. HFT also promotes interoperability between the exchanges in such a way that if an order is getting delayed to execute on an exchange, it can connect with other exchanges and execute the order using their orderbooks.
Crypto Market Bots have already started populating the blockchains to demonstrate trade activity, but not to the same extent Wall Street Bots are as prevalent. As time goes on, the AI’s intellectual performance should improve as the dataset we discussed earlier continues to grow.
Bitcoin is still run by emotions of the traders and this is one of the predominant reasons which keeps the cryptocurrency market highly unpredictable.
Sentiment analysis involves analyzing data from blogs, articles, social media, stock message boards, video transcripts, and many other sources to understand the market sentiments on a certain topic.
Away from the crypto markets, AI is a game-changer to analyze the sentiment of the market where it uses tweets, keywords, social media posts, and blogs, produce data sets, to evaluate the sentiment analysis in the market.
But by analyzing all of the known influencers and correlations in a way the human mind just can’t do, an AI can produce the buy/sell or bullish/bearish sentiment of the market. In other words, it can at least produce the direction of the forecast, although not the estimated numbers.
Well, at least not yet. CoinGenius will keep you updated here.
These emotions can range from sadness, excitement, surprise, anger and fear rather than just stating either a positive or negative emotion.
AI contains the potential of naming the emotion based on its learning. Some available AI bots provide this information free to users, especially for Bitcoin and Ethereum, the largest digital coins, but this advantage is momentous for traders.
Data is the new fuel and various startups have started monetizing research and insights produced by examining the data. But what better way than Machine Learning & AI is better at this job?
AI based platforms can also be used as a means for data scientists to monetize their insights. These startups are creating and selling indicators and signals crypto traders and are able to optimize their profits. Interoperability and data exchange is the need of the hour, not only across blockchains but with traditional centralized exchanges and institutions as well.
Currently, it is impossible for Blockchains to interact with each other, limiting trading tokens to crypto exchanges and wallets.
This is one of the impediments which cryptocurrencies are facing to spread its blanket like a financial services ozone around the planet.
*** (CoinGenius will keep you updated on CoinTainers here also…)
Combined with AI-driven services, the interconnectedness, or “interoperability” of blockchains could allow for the creation of apps that can automatically execute trades based on a multiple of market factors and not just the events concerning one blockchain or cryptocurrency.
These factors have been discussed earlier.
This is where ambitious startups like CoinGenius can truly provide Deep Insights for Crypto Assets.
These advanced models form the backbone of many AI learning programs that are used in to help CoinGenius’s users to receive accurate market information for their trading strategies.
Keep up with us, and learn more about our business at www.coingenius.ai
We promise to bring you quantifiable insights and academic market analysis to brighten up your crypto future.