How Does AI Impact Crypto Trading?

News, Opinion | April 15, 2020 By:

Take the industry – it doesn’t matter which one – and we will 100% get to the point, saying that its next technological breakthrough will be artificial intelligence. According to Crypto Event, the cryptocurrency sector is no exception, especially considering the fact that many ICOs (initial token offers) held in 2017 to come to the fore somehow managed to put this idea into their development concepts. However, what impact can artificial intelligence have on the cryptocurrency sector, in addition to the hype, and can it eventually replace human traders?

Companies earning with AI-fever

Artificial intelligence for technology is the same as blockchain for the cryptocurrency industry – a concept whose original applications have surpassed projects striving to grab the buzzword and make the most of it. Given that startups claiming to use AI raise funds by 15-50% more than conventional technology companies, the hype is understandable. However, unfortunately, all this hype drowns out the real progress achieved by AI-based technologies.

Note that in traditional financial markets, artificial intelligence is already used and quite successful. It is known that for the effective functioning of AI, a vast amount of data is used in the process of machine learning. The stock market is just perfect for this purpose because you can extract terabytes of information from it. Evidence that AI can outperform human trading is clear. 

Recently, Eurekahedge investment firm researchers examined 23 hedge funds using artificial intelligence and concluded that computers yielded much better results than people-managed funds.

AI is already here but distributed unequally

But what about cryptocurrency markets?

In the much smaller cryptocurrency sector, there is an opinion that too many external factors are used to use artificial intelligence successfully. However, this prejudice will soon become obsolete, because, with the development of software capable of simulating trillions of exchange days, AI-driven algorithmic trading will inevitably begin to prevail.

Danil Myakin is a co-founder of Squilla Capital, an analytical service for evaluating crypto projects and markets that uses artificial intelligence and big data. He explained that the number of systematic human errors is almost impossible to reduce. We all know, and it is no surprise that people trade on emotions, often unknowingly. Information-based decision-making reduces the interference that people’s mind can obscure, preventing them from acting rationally, and focuses solely on the signal.

How it applies to crypto space?

There are a number of areas in the cryptocurrency industry in which artificial intelligence technology demonstrates effectiveness with respect to algorithmic trading. One of these areas is high-frequency trading (HFT) – a type of exchange trading, in which thousands of transactions are carried out every second without human intervention. In this case, to respond to market movements faster than others, traders rely on the analysis of technical indicators of many exchanges. For example, if a trader is going to place a large order to buy BTC on any crypto exchange, HFT can almost instantly execute an order on another exchange, making money at a price jump.

Implementation of AI algorithmic trading is also possible through an API connection with leading exchanges. Traders can choose smart indicators (for example, RSI and EMA), according to which the software will make a decision, as well as set periods. AI executes transactions within the given parameters. Traders can test data, correct it and optimize it. Over time, the effectiveness of artificial intelligence will increase, as the number of data packets at its disposal will increase.

In addition to cryptocurrency markets, artificial intelligence is also used in analyzing the intensity of events, checking the information in the media and determining the mood of the community about a project.


Of course, artificial intelligence is not a panacea that can optionally be applied to any aspect of the cryptocurrency industry, and it can not replace the most experienced traders in no time. Nevertheless, this invisible hand is already clicking on the secret strings of the crypto sector, providing its participants with everything from fast execution of orders to identifying bots and scammers. But we all slowly get to the fact that artificial intelligence is rapidly gaining a foothold in our lives. For some, it poses a danger to life, but it can help us to achieve a lot of great things, including crypto industry.