Forecasting the cryptocurrency market using AI
Augur’s decentralized platform for creating peer-to-peer prediction markets is based on the experience of network participants. Nevertheless, it allows it to make fairly accurate predictions on cryptocurrencies. Augur announced the creation of its 1,000th market on August 16 of this year. Augur was developed by the Forecast Foundation, a nonprofit organization, to form accessible sources of public forecasting.
In contrast, the NeuroBot platform is based not on user experience, but on the work of neural networks. With their help, it makes predictions about the dynamics of the cryptocurrency market. The system itself monitors exchange rate fluctuations, compares them, and predicts changes for the next day. The authors of NeuroBot claim that their platform analyzes the changes with an accuracy of up to 90%. The creators plan to improve the system by including technical and fundamental analysis in it.
Such platforms can make life much easier for novice crypto traders who have not yet had time to learn the full scope of information. Of course, it is impossible to rely on prognostic platforms for everything, but they can take the lion’s share of technical analysis of the market and conduct it with high accuracy.
Market sentiment analysis using AI and ME
Determining the sentiment of the cryptocurrency market requires processing a lot of different data. This includes articles, blogs, forums, and even comments under them. Senno, a platform based on blockchain and artificial intelligence technologies does the analysis automatically and is able to give the result in a short time. The system also applies elements of machine learning in its work.
Senno has also signed a partnership agreement with CryptoScanner, an app that uses artificial intelligence to predict market sentiment and shares the results with traders to help them develop their strategies.
Finding parties to make deals
One of the problems of the cryptocurrency market is the lack of liquidity. Strong exchange rate fluctuations make digital currencies not very attractive as business payments. The difference between supply and demand is often compensated by high fees from exchanges and banks. To solve the problem, platforms like TradeConnect, which uses machine-learning technology, are being used. It uses a side-matching protocol and helps the customer find the right broker and bank, transact directly, and pay minimal fees.
Individual companies are specifically engaged in the development of AI platforms related to the provision of services in the cryptocurrency market. For example, the Money Token team created AI assistant Amanda, which will lend to members of the cryptocurrency community. The virtual assistant will be able to provide loans against cryptocurrency collateral and deal with full support – from the moment of application till full repayment of the loan.
Security when using cryptobots
It is necessary to be careful when entrusting someone with the API keys of your exchanges. Only trusted services with a good reputation deserve it. After all, the API key is a kind of permission to use your account, including trading through it and the withdrawal of funds. Any bot requires the API to work, that in itself is not a sign of fraud.
Examine each platform carefully before you start working with it. Find out what security methods are used there. Always activate two-factor authentication to limit account access.
Advantages of cryptobots:
- Round-the-clock trading. A bot does not need to sleep or do other things, unlike a human.
- Absence of human factor. People make mistakes, both in trading operations and in auxiliary ones, such as entering details.
- Instantaneous automatic execution of operations according to the set parameters.
- Lack of emotion and strict adherence to the plan.
- Ability to test trading ideas with Paper Trading or based on historical data.
- Convenient diversification and risk-sharing.
Disadvantages of cryptobots:
- There are unsuccessful or outdated strategies in cryptobots. An inexperienced user who chooses such a strategy will incur losses.
- Many fraudulent projects. Don’t be fooled by promises of hyper profits, this should immediately alert you.
- The bot should be monitored, adjusted, and maintained, contrary to the common misconception of “set and forget.
- There are bots with low-quality software. Usually, these are new and raw projects, so it is better to choose proven and already 100% debugged platforms.
- A bot, even a properly configured one, does not guarantee profits. There are many factors that affect prices and earnings.
Advantages of automated cryptocurrency trading
During the period of its prosperity, the now-bankrupt cryptocurrency exchange MT-Gox used very actively a special cryptorobot, called Willy, which manipulated the value of BTC coins. This trading robot was the first bitcoin bot that actually caused bitcoin prices to rise and then fall. This situation took place in 2012-2014, when the cryptocurrency market, and all decentralized money, was little known and not very popular.
Naturally, the current development of the crypto industry has completely blocked the possibility of using bots for such manipulations of the price of decentralized coins. Robots are mostly used to automate trading on exchanges. Such implementation of algorithms is due to a good set of advantages of speculative activities carried out through cryptobots. The most significant advantages are the following:
- The trader does not need to incessantly monitor the virtual currencies market and constantly calculate the moments to open positions;
- The use of cryptorobots to trade digital assets eliminates the fear factor and the element of emotional state in trading decisions. Most novice crypto-traders lose deposits solely due to psychological and emotional instability and neglecting the rules of their own trading strategy;
- The cryptocurrency bot is able to clearly recognize chart patterns, candlestick patterns, directions of quotations, and trend reversal points, which are often invisible to the trader;
- A well-tuned trading robot analyzes charts more effectively, makes more efficient trades, and searches for the best entry points.
The mentioned qualities are just an example of the usefulness of automated cryptocurrency trading. There are many more advantages of such programs, which can help any trader.
Conclusions
There are several limitations to the widespread use of the technologies of AI. In particular, the lack of information, because the cryptocurrency market is relatively new compared to the traditional stock market, and the knowledge of AI is often limited by the amount of information that humanity has.
Another difficulty is that highly accurate and complex machine learning algorithms require powerful and sophisticated computing hardware that only giant companies can afford. But all this can be solved by learning and strengthening AI and ML fundamentals from any decent AI course
It should be remembered that the quality of any cryptobot is determined by the correlation between its efficiency and real value. Any bot for trading cryptocurrencies on an exchange must have a stable performance.
Citation Refrence: “https://www.analyticsvidhya.com/blog/2021/04/how-ai-is-used-in-the-cryptocurrency-market/”
Bitcoin has now surpassed Tesla and Facebook by market capitalization, according to AssetDash.