The time will soon come when artificial intelligence (AI) will run on top of cryptocurrency systems such as Blockchains with the capability to elevate machine learning capacity and produce new financial products. It will make it one of the main arising technologies. According to research on the future of AI, the market is expected to grow to a total of $190 billion by 2025. Given the expected market growth, Blockchain and AI convergence are unavoidable.
There are over 4,000 cryptocurrencies today, and the number is steadily growing. Without regard to all the popularity that cryptocurrencies have gained from their high but unexpected returns, it still causes a lot of confusion among new investors. A lot of people have heard of cryptocurrencies, but the idea of decentralized currencies and how they are traded is still a new concept. Moreover, since the advent of the first cryptocurrency, Bitcoin, there has been high volatility and fluctuation in valuations. This further confused retail and institutional investors, thus, led to emotion-based investment decisions.
Understanding and implementing investing in cryptocurrencies requires a lot of skill and time to understand the market. With the advent of more technological tools, investors and traders are increasingly turning to AI and machine learning (ML) to understand what investing means. AI and ML are proving their worth in the cryptocurrency market as more and more institutional investors embrace investing in cryptocurrencies. Since Blockchain technology supports cryptocurrencies, AI can work with Blockchain to solve many problems.
Accurate Predictions of Cryptocurrency Market
One of the biggest challenges in cryptocurrency trading is market volatility. In recent years, Bitcoin’s value has proven to be volatile. For example, between October 2017 and January 2018, the Bitcoin price moved 5% within 24 hours. Volatility is due to different perceptions of the intrinsic value of cryptocurrencies, whether they are considered assets, goods, or services. In addition, the future of Bitcoin is uncertain, resulting in fluctuations within the cryptocurrency market.
As investment opportunities increase, manual research, extraction, and analysis processes are no longer efficient for investment identification and buy/sell signals. AI has become a new tool in the financial industry and is becoming more powerful when combined with Blockchain. Large financial institutions like Goldman, Citi, and Barclays have already incorporated AI into their workflows, and small businesses are starting to implement AI.
Cryptocurrency Market Sentiment Analysis
Sentiment analysis alludes to the use of AI and natural language processing to analyze people’s sentiments or opinions about a particular topic. When investing in cryptocurrencies, generally positive sentiment towards a digital currency can predict a price increase, while a generally negative sentiment can predict a price decrease.
It is necessary to collect, process, and analyze large amounts of various data to find out the sentiment of the cryptocurrency market. This includes news, blog posts, articles, forums, social media posts, bulletin boards, and related comments. AI allows us to process massive amounts of data from the internet, as well as Blockchain data at scale, and quickly analyze the sentiment, whether negative, neutral or positive. AI and ML can analyze a variety of signals to identify market manipulation based on anomalous behavior seen in sentiment indicators. As sentiment is added to the data, investors know what to do with the insights they receive.
Monetize Crypto Insights
Crypto traders highly depend on a variety of signals. However, because unstructured data dominates the digital environment, generating accurate signals manually can be nearly impossible. Large amounts of data must be clean, up-to-date, and accurate before being analyzed to gain insight into investments.
AI allows data scientists and developers to create technology that traders can use up-to-date and clean information. With the help of AI’s natural language processing techniques, data can be classified and extracted according to specific attributes including currency name, document type, currency originator, etc. Investors and traders can increase their profits with the help of the collected information. For example, with the AirVape discount coupon, you can have their accessories.
AI will not be a replacement for individuals in investment firms. The combination of the skills of talented employees and AI could provide greater value and profitability, especially when investing in cryptocurrencies. However, adopting AI requires a strong internal team framework because those who manage AI-based processes can deliver greater value by increasing profitability.