From Google Home to Alexa, artificial intelligence will play a big role in cryptocurrency trading
From Google Home to Alexa, the role of artificial intelligence (AI) seems to have grown over the years. It is now believed that AI will play a bigger role when it comes to crypto exchange. “As more financial institutions begin to offer crypto-assets as a wealth management offering, AI-backed trading roles will become more popular. There are over 4,000 crypto-assets. currencies and even the oldest coins show strong price fluctuations. Similarly, the Bitcoin 30-day volatility index is double the value of 2016 (according to data published on buybitcoinworldwide),” said Saurav Raaj, founder, director of Wize, a non-fungible token (NFT) infrastructure for enterprises, at FE Digital Currency.
According to industry watchers, AI is being used in smart trading systems for stock market forecasting and currency price prediction. According to a report from IEEE Access, Generalized Autoregressive Conditional Heteroscedasticity (GARCH) is a time-series statistical model used to understand volatility. “AI is in the business of analyzing market sentiment. Unlike traditional stocks, discussions between trading communities and reports on social media can guide trading decisions. AI with language processing (NLP) can analyze market and community sentiment and provide valuable insights to traders,” Raaj added.
Courtesy: IEEE Access, ResearchGate.
It is believed that the trading decision is usually based on behavioral biases that cause them to act on an emotion that could lead to errors while processing information. “AI-guided crypto trading is unlikely to get rid of emotional factors, it is likely to amplify this via machine learning. A deliberate fix in AI programs to avoid trading at large corrections , and surges can help. However, it is also likely to slow down the usual stop-loss or take-profit exercise,” said Economic Intelligence Unit (EIU) India analyst Liquing Yu. Indonesia and Singapore.
Additionally, industry experts have noted that if properly implemented and trained, AI can help eliminate human biases. According to Vikram Pandya, Director, Fintech, SP Jain, it definitely helps in making science-based decisions backed by data, not impulse.
According to Business Insider Report of June 2019, AI is used in the banking industry in three areas, namely conversational banking, fraud detection, risk assessment and credit underwriting. AI-based systems can help process trading data, which can help traders make better investment decisions. “AI combined with machine learning (ML) can provide protections against such attacks and reduce damage in real time. In extreme cases, it can be used to trip circuit breakers and even stop trading,” Raaj added.