AI and automated trading in the cryptocurrency market

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Updated: 30 August 2020

The cryptocurrency market continues to attract new investors as it becomes one of the leading online trading markets. During 2017, initial coin offerings (ICOs) boomed, attracting an influx of new and inexperienced investors. Cryptocurrency trading in general is highly technical and challenging, adding to the risk placed on new investors.

As a result, the platforms offered by forex and CFD brokers, along with those of independent companies, have introduced what could be a groundbreaking way to make the most of trading with minimal knowledge: Artificial Intelligence (AI) as a means of automated trading. This is not a new concept; it was already seen in the forex trading world, but its use has now expanded.

The use of AI in crypto trading

AI allows traders and investors to access data from past market movements, along with any related responses, online and use this information to analyze and predict future movements. If a trader were to perform this analysis manually, it would be extremely time-consuming and there is a chance of missing something. AI eliminates both of these problems. Although many models and programs exist that claim to be accurate, it takes top-quality software ­– at a high price – to get the best results.

Endor is a leading firm in this department and has been conducting tests and research to improve these tools. They analyze human behavior and have created a search engine function that allows users to search for solutions to various market circumstances.

Previously, these tools were mainly accessed by larger companies or firms, but they have now been introduced into the crypto world to supply highly accurate predictions for various market conditions through Protocol. Smaller investors can receive crucial insight into the market without paying an unreasonable price or conducting extensive analysis of their own.

Indicators and signals

Signals is a firm that has ventured into a similar project, selling indicators and signals to traders who do not have the necessary skills or knowledge to identify their own. The Signals platform provides these indicators in a user-friendly way and is based on data gathered by AI. There is also a prediction market that will not only help with quality predictions of market movement, but will also allow skilled traders and data scientists to monetize their abilities and knowledge by selling their analysis and predictions. Through the creation and use of these automated trading strategies, both new and experienced investors can benefit in their trading careers.

Advancing the interoperability of software

Although these tools are already extremely useful and reliable, developing better abilities within the programs for the exchange of software and systems would make these tools even better. Automated trading with AI would benefit greatly if blockchains were able to connect and share data and create smoother automated trading executions on platforms like trading apps. Traders would then be offered the additional advantage of having clear executions rather than risking missing opportunities if they were to time their trades themselves.

Improving insights for profitable trades

Traders might be able to access the data collected by each individual blockchain through tools such as Endor and Signals, but limits are still present because the blockchains cannot transact data and therefore only reflect information about a single cryptocurrency. If you were able to access a range of cryptocurrency analysis, you would be granted a better overall insight of the relations between all the various financial markets. This would allow for better insight and better trades. These tools can be further enhanced with the use of application programming interfaces (APIS) and other tools and developments.

In short, greater interoperability will allow for a larger collection of knowledge and insight and better strategies for automated trading functions in the cryptocurrency market. This could be the gateway for novice investors to find their place in the trading industry, even with minimal understanding, and further the growth of the crypto market.