AI (Artificial Intelligence) is among the technologies that we keep hearing a lot of good things about. And of course, many of these things are true as we have witnessed through hundreds of use cases of this futuristic technology.
As of late, we have also been hearing about the projects that are successfully using AI in the crypto trading industry as a way to help traders predict the market, identify possible frauds, among other things.
So, if you are also one of those wondering about how or whether AI can disrupt the crypto industry, here are some use cases of the crypto trading projects that are already benefiting from the use of this technology.
- Crypto Marketing Analysis & Prediction
- Predicting the emergence of pump and dump schemes
- AI Crypto Trading Bot
Crypto Marketing Analysis & Prediction
The best use of AI in the trading industry is, of course, to analyze and somewhat predict the market behavior based on past trends. And, this is exactly what the Cowrie Stability AI does.
The Cowrie Stability AI was launched as a part of the Cowrium blockchain ecosystem with the aim to help crypto traders read and understand the market behavior in order to improve the profits.
The program employs advanced AI algorithms to analyze the historical data related to the trading behavior of different cryptocurrencies, based on which it makes near-exact calculations for future market trends. Using the available data and analysis reports along with high-end quantitative strategies, it makes predictions for market behavior.
The Cowrie Stability AI can be integrated with global crypto exchanges to analyse the data and make market predictions to provide users with important stats to help with decision making.
Unlike traditional market analysis systems that take too much time to make calculations and provide stats, the Cowrie Stability AI can provide actionable insights within milliseconds based on real-time market trends.
Predicting the emergence of pump and dump schemes
Lately, there have been many incidents of pump and dump schemes, where a group of malicious investors buys a relatively low market value/cap cryptocurrency at a high price in order to create a buzz around the project. That boosts the coin demand unexpectedly, making more and more people buy it. And once the price is high enough, the same group of malicious people immediately liquidate all their holdings, resulting in a massive profit.
Since cryptocurrencies are highly volatile, the entire process (buying -> hype creation -> liquidation) concludes in just a few minutes.
However, two researchers from the Imperial College of London have found a way, an AI algorithm to be exact, to predict the probability of a pump and dump scheme. Jiahua Xu and Benjamin Livshits studied multiple pump and dump schemes and trends using artificial intelligence and found that most of such fraud schemes were preceded by an unexpected hike in the buying activity of coins that were otherwise little considered. So, they designed an algorithm to identify such unusual cryptocurrency buying activities.
During the initial tests, the algorithm reportedly did a superb job of identifying pump and dump schemes based on suspicious activities, however, the public availability is still under question.
AI Crypto Trading Bot
Tejeswar Tadi, Student Ambassador at Intel IA Academy, a few years back published a project titled “Deep Learning for Cryptocurrency Trading” that suggested that the market value of a cryptocurrency is directly related to the feelings or sentiments of crypto traders.
He proposed the use of artificial intelligence to determine the correlation between the market value and trader sentiment for a cryptocurrency. The use of AI can help understand the general sentiment about a particular cryptocurrency by analyzing the user behavior from comments on forums and social media.
Further, it involved the study of the impact of these behavior trends on the market value or price of cryptocurrencies.
As published on the official Intel IA Academy website, the purpose of the study was to create an AI Crypto Trading Bot that could help with trading decisions based on trader sentiment.
Trading Signals for Monetary Value
There are one or two online platforms that sell trading signals and strategies in exchange for money. What they essentially provide is access to critical decisions or stats informed by an AI analysis of hard data. The platform connects data scientists with crypto traders for a healthy exchange of AI-based data insights. While data scientists and AI engineers can use such platforms to monetize their skills, crypto traders can benefit through informed market insights based on critical data.
The platform uses AI not just to analyze and predict the behavior of the market but also it makes all different types of crypto trading models available in one place, making it easier to use for the users. Platforms like these enable crypto traders to have access to useful insights to increase their trading profits even if they do not have any significant expertise in the field.
High-frequency trading (HFT) is a technology that uses AI to analyze crypto trading indicators across multiple exchanges in order to quickly understand and respond to market movements.
Being able to recognize and understand the market movements will allow traders to take immediate action for high profits. For instance, if someone was to sell a huge number of BTC in the market, the technology could be set to automatically and almost instantly place a purchase order on the same or another exchange to leverage the price drop.
Similarly to the above scenario, the AI can be used for facilitating automatic trading based on decision-making triggered by specific indicators.
As we have seen, the use of AI in crypto trading and other cryptocurrency activities is nothing new. Many blockchain projects are successfully using artificial intelligence to make the crypto trading process easier, cost-effective, and more efficient for the end-user. However, there is much more we can achieve with proper use and application of AI in crypto trading on a larger scale.
What do you think is the best way to use AI to improve crypto trading? Do you think it will have bigger benefits in the long term? Let us know in the comment section below.