AI Bots For Cryptocurrency Trading: Pros, Cons, Prospects

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4 Apr 2024

In both traditional and cryptocurrency investing, the primary factor determining the profitability of an operation is the ability to make decisions fast. In the cryptocurrency market, conditions are intensified due to the high volatility – action here needs to be even quicker.
The work schedule of a crypto entrepreneur often implies round-the-clock engagement, including exhausting constant monitoring of price charts greater. Over time, the effectiveness of such work will decrease, contributed to by fatigue, decreased concentration, and the inability to engage in other processes.

Trading bots – what are they?

To ease the lives of cryptocurrency traders, special trading bots were created for the crypto market. Their task was to autonomously operate according to the strategy defined by the user. The automated process of monitoring and conducting simple trading operations allowed entrepreneurs to save time and increase profits.
The transition from traditional manual trading to trading bots wasn’t perfect. Traders still needed to spend time setting up bots and coordinating processes. Market analysis and forecasting also had to be made by users. However, the development of AI technologies and their integration into the cryptocurrency market laid the foundation for creating the most efficient mechanisms for automated trading, capable of providing users with full passive income.

AI bots for crypto trading: features

Unlike their predecessors, simple trading bots, AI bots are capable of:
Market analysis;

Analyzing the chosen strategy and identifying its strengths and weaknesses;
Making forecasts based on the real market situation;
Drawing conclusions from completed operations;
Adapting the chosen strategy to the changing conditions of the highly volatile market.

All this becomes possible due to the integration of artificial intelligence, which is characterized by fast learning capabilities.

Using neural networks in trading

In recent years, there has been a trend of integrating AI technologies into all spheres of life. It is most successfully realized in the workspace, where goals, tasks, and results can be clearly defined. While the general audience has suspicions against GPT chats and neural network-generated images, entrepreneurs actively use the new benefits of the digital civilization.
Here are several examples of using AI capabilities in trading:

AI can work with huge volumes of data. Unlike humans, a neural network can quickly analyze a specific information array and make a clear conclusion based on it.
AI makes more accurate forecasts. When it comes to predicting future price fluctuations, AI is a perfect tool for that, since it can cover a much longer period in quick market analysis than a human.
Using AI in crypto trading increases the efficiency of the process. With the help of a neural network, the user can determine the most promising moment to sell or buy an asset.
AI aids risk management. A neural network can calculate the risks for each specific trade.
AI successfully handles the development of trading strategies. However, in order to avoid errors, the user will need to adjust the strategy independently in case of any discrepancies with real goals.
AI can assist in adjusting user cryptocurrency portfolios. Based on market sentiment analysis and compiled forecasts, an AI bot can help entrepreneurs diversify and optimize their cryptocurrency holdings.

Cons of using AI bots for trading

Despite the fact that trading and AI bots significantly simplify the cryptocurrency trading process, relying entirely on them is not recommended. Automated processes have several drawbacks that might ruin all user's work:

Risk of technical failure. Like any software, trading AI bots are not immune to failures, hacks, and other technical issues. Therefore, users need to periodically monitor their work independently. Otherwise, there is a high probability of significant financial losses.
Exchange fees. Trading bots are aimed at quickly and frequently executing transactions. The positive side of this process is high profit volumes and reduced risks, while the negative side is the commissions charged by the trading platform for each operation. With an incorrectly chosen strategy, the profit from AI bot work can almost entirely go to pay fees.
Technical complexity. Although developers strive to simplify all processes related to setting up their AI bots, implementing such a mechanism can be a problem for some users. This especially applies to novice traders and those unfamiliar with programming, algorithmic trading, API features, and trading rule settings.

Prospects for using AI bots in cryptocurrency trading

With the development of information technology markets, the cryptocurrency industry, and the Web3 space, the emergence of AI bots trading is a logical result of progress rather than a bold experiment.
Simplifying and automating crypto trading expands the horizons of the crypto world and provides developers with new spaces for implementing ideas. Moreover, integrating artificial intelligence allows attracting more potential entrepreneurs and users to the digital financing sphere, as it becomes more understandable, convenient, and secure.

Conclusion

While AI bots may seem like the superheroes of the Crypto World, capable of crunching numbers faster than a speeding bullet, let's not forget they're not invincible. Just like Batman needs his trusty utility belt, traders still need to keep an eye out for technical glitches and avoid the Joker of high exchange commissions. But hey, with AI by our side, at least we can trade with a bit more confidence, knowing there's a digital sidekick ready to crunch numbers and maybe even crack a joke or two along the way!
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “Liquid Restaking Protocols: the New DeFi Primitive” and “Authorization vs. Success Rates”.