Key points to remember
- The AI hype train has indeed left the station. But what if you add the AI hype to the crypto hype? Well, this trendy train goes from steam locomotive to high-speed train
- AI has the potential to fundamentally change the way the crypto universe works and could solve many of the problems that have caused such a severe crash in the industry in the past.
- The keyword is potential, and there are plenty of potential issues and downsides that need to be covered before you see widespread adoption.
- But when it comes to AI-powered crypto investments, the future is already here.
AI takes 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 incorporate it into their models. A few weeks after its launch, Microsoft is said to be about to finalize a $10 billion deal with the creators.
Crypto has become a serious player in the global economy, despite its ups and downs. Some investors pour their entire portfolios into Bitcoin and Ethereum. Many are confident that the crypto market will rebound stronger than ever.
But AI and crypto, together? There is untapped potential that we are only just beginning to see tapped into. It could transform both industries.
Download Q.ai today to access AI-powered investment strategies.
The problem with crypto investing
Cryptocurrency does not work like a traditional financial system. Crypto is volatile and prone to wild fluctuations. We have seen more than one coin fall under the pressure of the economic downturn.
Many lament the lack of regulation, but crypto was born out of greed from the 2008 recession and a desire to get away from the big banks. The problem? Fraud is rampant, crypto hackers are rampant, and there is no recourse. Nearly $2 billion worth of crypto has been stolen in August of last year. Many would never see that money coming back.
Overall, crypto is developing an image problem when it comes to investors losing their money. AI could be the answer she’s looking for to boost compliance without full regulation.
Why Crypto and AI Work So Well Together
The strength of AI lies in pattern recognition. Crypto’s philosophy around decentralizing money is admirable, but currently flawed in its execution. That’s why we could see the beginning of a beautiful friendship forming.
Both crypto and blockchain rely on 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 prevent these rampant cash grabs.
Many people consider crypto trading to be 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, it works well – when you add a volatile crypto to the mix, it makes even more sense.
The average retail investor can use this to their advantage with crypto trading packages, similar to ETFs. Not to mention that if crypto is perceived as less risky, more investors will join the party.
This is perhaps the greatest strength of introducing AI to crypto. Much of investing in crypto relies on your own understanding of the subject.
Gone are the days of spending hours researching which crypto coins or tokens are the best to buy. AI could decide everything for you, freeing up valuable time. It could also reduce human error in cryptographic data.
Where could we see AI going 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. Here are some use cases of how AI could help crypto investors.
AI-powered natural language processing could recommend the best crypto to buy (and with Q.ai, in some respects it already does). If it feeds the right data feeds, like Twitter posts and news articles, the AI program will quickly get a sense of public opinion towards certain currencies.
NLP could also help predict prices, identify risks in a cryptocurrency, or try to guess future growth based on how many people are talking about it. It is a nifty artificial intelligence 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 of their cousin, DAAs. These agents are coded programs designed to make decisions.
How do they work in crypto? The DAA becomes a powerful AI-powered fund manager. There is no human error or bias to worry about. You can sit back and relax while the AI takes care of your crypto wallet.
We could see AI being used to bring crypto into the mainstream once and for all. One of the major gateways currently stopping crypto is the technical language and understanding needed to complete a transaction.
AI could create personalized advice tailored to risk tolerance, tailor marketing and communications to a user’s browsing habits, or provide curated lists of crypto educational resources.
With the barrier to entry removed, 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 fast enough, they too could harness its power to protect banks. Compliance and anti-money laundering programs would be easier to implement if AI monitored for signs of financial crime.
AI-monitored real-time transaction systems could flag anything untoward, giving crypto an extra layer of security that banks so often complain lacks.
Are there any disadvantages?
The main concern is that AI is still in its infancy. We are waiting years for it to become a commercial and consumer entity, ready to meet the demands of a multi-billion dollar market like crypto.
AI needs a lot of data to train. If there is any bias in this data, it can lead to problems. In the case of crypto, we could see AI-powered market manipulation emerge in the market.
The darker side of Microsoft’s proposed large stake in ChatGPT is that it could pull it out of the market altogether. The technology could be wholly owned by large corporations, which would then have a controlling factor in the crypto market. The power of AI being controlled in the hands of a few would not hold promise for any innovation.
That being said, AI cryptography is an exciting new possibility that gives crypto traders a lot of hope. Given how quickly these two industries are changing, it’s only a matter of time before we see AI and crypto make big strides together.
AI and crypto investing are already here
We’ve talked a lot about what the future of AI and crypto might look like, but in many ways that future is already here. At Q.ai, we are pioneering the use of AI by giving regular investors access to strategies and techniques typically reserved for hedge fund clients.
With our Encryption kitwe put this AI to work in the field of cryptography.
This kit works by asking our AI to predict performance and volatility for the week ahead, 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.
This removes the human element and allows our AI to focus only on the data it sees, rather than getting carried away with the Reddit hype about Lambos and moon rockets.
Download Q.ai today to access AI-powered investment strategies.