The crypto space like all others in the financial market is one in which people are trying to get ahead by using all the tools and data insight available. However, with literally billions of dollars at stake, countless people involved, and a similar number of variables to consider, going through the motions normally won't suffice in 2024 onwards. It is for this reason that automation through artificial intelligence could be the thing that takes the space into the future.

 

So it is crucial to discuss how AI is revolutionizing space and how it can work to benefit you or your company from sentiment analysis to algorithmic trading bots. Let's get started!

Contents:

- Basics around the tech and style of trading

- AI vs. algorithmic trading

- AI-driven sentiment analysis

 Algorithmic trading bots

- How the tech helps

- Tireless monitoring

- In risk management

- In backtesting

- Major concerns

- Final thoughts

Basics around the tech and style of trading

AI trading is, as implied in the above intro, part of general automated trading, which as a concept, can be traced back to 1949, and also includes the use of algorithms. Some will conflate algorithmic, and AI trading, as the same, and they are quite similar in that they seek to get the best results for those using them by doing the following:

Analyzing vast amounts of data at rapid speeds, and in real-time

Removing the emotional, and general human elements of trading, making for better accuracy

AI solutions make trades automatically, streamlining the process and improving efficiency

AI vs. algorithmic trading

Despite the above the two are different in the way they operate. While algorithmic trading still needs human input, AI updates in theory require less of it, as it can learn from data. However, with algorithmic new bots solutions, it can then be used to make predictions and thus execute trades that the one using it may have not even thought of. This, of course, makes them both more advanced and makes it the natural next step in the evolution of not just the crypto space, but the entire financial market as a whole. If you use both technologies and their solutions, you can acquire the most from your results.

 

As it stands, many crypto platforms claim to have this technology available to be leveraged by users. This typically comes in the form of trading bots that they can use to not only execute trades but also manage their portfolios.

 

AI-driven sentiment analysis

AI's capacity to collect and analyze vast volumes of data in real-time gives traders significant insights into market mood. However, you have to recheck the data and make sure it corresponds to reality. Artificial intelligence can better forecast market moves by analyzing social media trends, news stories and other relevant sources but you need to double-check that data first.

 

As we can see today, AI is becoming more integrated into social media and other areas, and perhaps leading to a move toward newer, AI-regulated platforms that prioritize this tech. While Gartner estimates concerns around search engines and other areas within the innovations, predicting new changes, the AI applications themselves in crypto trading are becoming increasingly useful. It continues to impact digital interactions and on decision-making. Let us simply say that AI has the ability to change how traders engage with cryptocurrencies, manage portfolios and deal with market volatility, and there is more to come.

Algorithmic trading bots

AI-powered trading bots are changing the market already and in the cryptocurrency trading industry as well. The bots make trades using real-time data, devoid of human emotional biases. They guarantee that deals are executed with accuracy and speed, which is critical in the volatile cryptocurrency market.

 

How the tech helps

Now that we have an idea of what AI trading is, let's look at specific areas in which it can help you. These include the following:

Tireless monitoring

The crypto market has daily volumes in the tens of billions of dollars, all running 24/7, 365 days a year, unlike other areas in the financial market. As such, it's wise to be ever alert to take advantage of opportunities, and others be caught sleeping, and AI, which doesn't sleep, helps in this area.

 

Speedy mode of operation

This point and the one above actually complement each other quite well because you want to not only be able to execute trades throughout, but you need them executed quickly. This is because the crypto trading space is notoriously volatile, and things can turn on a dime, so taking advantage of opportunities when they present themselves gives you an edge.

 

In risk management

Because the crypto space is so volatile, it is important to manage risk, and AI can do this because it's so good at analyzing data quickly, and accurately. From this, it can better manage your portfolio and even execute measures like stop-loss orders.

 

In backtesting

A key aspect of crypto trading is backtesting, which is the testing of your strategies on historical data to see how viable they would be in the real world. By doing this, you're able to fine-tune your strategies so you can have the best outcome in the real world, and good AI crypto platforms typically help with this.

 

Major concerns

It's fair to say that as time progresses and the crypto space continues to develop, it, as well as the AI technology used, will become more common based on how useful they are. It would be irresponsible, however, to speak of AI in crypto trading without talking about the present concerns, of which there are some major ones such as:

- This tech is relatively new, and won't work as it will theoretically, so it has ways to go before then

- The fact that whatever training data is fed to the AI models has to be accurate, otherwise the result fails

- While AI needs less human input than algorithms, it's not completely autonomous, so it still needs humans

Final thoughts

While it is true that AI trading in the crypto world, as we see it eventually becoming, is quite a ways away from us, it's still very useful in its current form. The crypto space is fast-moving and highly volatile, so tools such as AI trading bots can help you navigate such treacherous waters and get the best result possible.

 

As with all things in the general financial market, knowing the risks is necessary and AI, centers around getting the right data into the model. Failure to do this as well as to adapt when necessary will render the tech essentially useless. With a comprehensive financial market data source that could play an important role in improving AI trading, you can get reliable and up-to-date crypto and financial information. It is critical for the proper functioning of trading strategies.

 

You can get your Real-Time and Historical Cryptocurrency Data with a free Crypto Data API key.

Build with us today!

Start Free Trial