AI and Crypto Trading: Benefits, Projects, and the Future

By Lipsa Das

Artificial intelligence is proving itself a disruptive force across a myriad of different sectors, and blockchain is no different. From intelligent chatbots to AI-powered trading algorithms, AI has been changing the way humans interact, transact, and create long-term strategies.

In crypto, for instance, artificial intelligence is enabling machines to learn to trade, sometimes even more effectively than humans. In the volatile and complex crypto market, AI trading bots offer a welcome alternative to making trades based on FOMO or emotion.

In this guide, Ledger Academy will unpack how AI is revolutionizing the crypto trading process and how you can potentially use it for your trading journey.

Let’s dig in.

AI in Crypto Trading

Artificial intelligence (AI) is the ability of a machine to perform human intelligence-based tasks such as reasoning, learning, and rational decision-making. Since machines can complete a range of complex tasks faster than a human, the potential use cases for AI are endless.

AI is particularly useful when assessing large amounts of data. While it would take a human too long to sort through some data, AI can achieve this with ease. What’s more, it learns from each piece of information it gets.

In a way, crypto trading and AI are a perfect match. With a wealth of crypto data on the blockchain, AI tools have access to vast data sets to identify trends and patterns – and make coherent decisions based on their findings.

Why Crypto and AI Work So Well Together

Trading the crypto market is a challenging task for an individual trader. Let’s look at traders’ common challenges and how AI helps.

Crypto Never Sleeps

Unlike traditional financial markets, cryptocurrency has no “closing time” each day. This means the crypto market is constantly active, and human traders need to be on their toes 24/7 if they don’t want to miss an opportunity. 

Data Overload

The crypto trading ecosystem has mountains of data: from historical token prices to transaction history to wallet details. This offers enormous potential insight for traders able to understand the interplay between all of this information.

But with so much to parse and analyze, this can be easier said than done for the average human. 

Volatile Ecosystem

The crypto market is notoriously volatile and – unlike the tradfi landscape – if a crypto project fails, there is no recourse for you, the user. As such, traders need as much insight as possible into project activities – in particular, signs that one might be about to falter.

In short, the crypto trading ecosystem is packed with data – and potential use cases for that data – but lacks the means of parsing and applying it coherently.

This is where AI proposes valuable tools for crypto traders.

What are AI Trading Bots For?

Automated Data Analysis

Keeping track of your crypto portfolio can be overwhelming. Having multiple assets means following their market value, and also tracking news events for each of them.

AI tools can do the hard work for you, parsing qualitative data to provide key insights. For example, Signal AI reads a huge amount of data on market sentiment. It uses this data to assess risk and identify opportunities, so traders can make informed decisions quickly. 

Signal AI sifts through an average of 5 million documents in 75 languages daily to track all mentions of the cryptocurrencies the trader wants to follow. Using its interface, you can easily search for specific keywords and look through historical developments of crypto projects, or identify changes in the way the project is being discussed. 

Rational Decision-Making Agents

Rational decision-making is one of the core principles of trading. In a pressurized environment – with potentially high stakes – it can be hard to make objective, non-emotional decisions when FOMO takes over. 

This is where AI shines, specifically decentralized autonomous agents – and their partner in crime, crypto arbitrage bots.

Decentralized autonomous agents (DAA) are AI programs designed to make trading decisions automatically, and based only on objective past data. These eliminate all human bias and error, basing decisions only on data and facts. 

DAA can be leveraged very effectively with crypto arbitrage bots to initiate quick arbitrage trades after identifying lucrative opportunities from market data. 

This system utilizes the power of AI to identify the opportunity and to carry out the final trade, with no human intervention – something that could form the basis of an always-on trading strategy.

Market Sentiment Analysis

Analyzing market sentiment has a major impact on how markets move and the crypto market is no different. However, analyzing sentiment is not always easy. Your analysis needs to be free of personal bias, and consider many different sources — not just other traders on Twitter. 

AI, on the other hand, can be more factual while analyzing market sentiment. Essentially, you can feed the AI bot extensive data from social media posts, news stories, and financial reports. The bot will then analyze this data to find common trends and patterns, and predict how the market can likely behave. It does this by using complex computer processes such as natural language processing (NLP), machine learning, and data mining. 

For example, an AI-powered NLP may extract keywords and phrases to indicate market sentiment. Words like “growth,” “strong performance,” and “record profits” in an earnings report can classify as positive sentiment. 

AI algorithms can also be trained on historical market data and can predict future price movements based on changes in sentiment. Take Endor, for example. It provides AI-powered predictions based on analysis of past data. 

Risk Detection

With their ability to assimilate huge amounts of data – and detect minute changes – AI can make a perfect tool to spot trading risky situations.

For instance, you can train AI trading bots to identify patterns in candlestick charts. This can alert you about specific chart patterns that might indicate future events.

The AI bot you might want to use depends entirely on your trading strategies. No matter the strategy, AI bots can assess the potential risk signals in real-time and give you recommendations based on data.

AI Crypto Trading Bots To Look Out For

Here are some trading bots that make trading fast and data-driven:

Trade GPT

Trade GPT is an AI crypto trading bot developed by ByBit crypto exchange. The chatbot parses the platform’s existing trading and market data to provide pricing insights, suggest trading strategies and offer in-depth market knowledge.

It enables you to develop sophisticated trading strategies without trawling enormous amounts of data.

Pionex

Pionex offers over 15 trading bots to help you custom-choose your AI strategy. Some of these include:

The grid bot – These bots help execute trades within preset price ranges. The AI can backtest data from the previous 7 days, 30 days, and 180 days to suggest the most appropriate trading price range and the expected profit percentage. 

The dollar cost average (DCA) bot –  Dollar cost averaging or DCA is a smart way to invest by buying a fixed amount of a stock or fund on a regular basis. This way, your buying price is averaged over a period of time. Also known as Martingal bots, DCA bots help traders buy cryptocurrencies at periodic intervals, like during every dip, to ensure that the potential losses narrow over time. 

There are several other bots like the rebalancing bot, crypto arbitrage trading bot, and more. 

CryptoHopper

AI-powered cloud-based crypto trading bot, CryptoHopper, helps automate trading strategies. CryptoHopper includes technical analysis indicators, customizable templates, and a drag-and-drop strategy editor. 

You can connect your Cryptohopper account to multiple exchanges like Binance and Coinbase, and set up automated trading bots. These bots can then execute trades based on market conditions and user-defined rules. 

Its most notable trading bot is the “Mirror Trading” bot which helps investors copy the trading strategies of successful traders. 

HaasOnline

Cloud-based trading platform HaasOnline offers advanced trading tools like automated trading bots. The platform allows users to create AI-leveraged customized trading algorithms. You can backtest and optimize these algorithms using historical market data.

HaasOnline also has a market-making bot that provides liquidity to trading pairs by placing limit orders at both buy and sell prices. This can help traders use arbitrage opportunities from the spread between buy and sell prices. 

HaasOnline provides customizable dashboards, real-time market data, news feeds, and a list of other advanced trading features.

Kryll

Kryll is an advanced crypto trading platform that utilizes AI and machine learning. The platform offers a drag-and-drop interface that makes it easy for all levels of users to test trading bots and strategies without prior coding experience. 

Kryll integrates a range of popular exchanges and provides various trading tools and indicators. You can use Kryll to automate and enhance your trading performance. 

Kryll also features a peer-to-peer marketplace where experienced traders can share their strategies for a fee, making it a useful tool for beginners. 

3Commas

3Commas Smart Bot uses AI to identify market opportunities and execute trades. Specifically designed for new entrants in the crypto space, the bot is constantly self-training using artificial intelligence, adapting to changing market conditions. You can use the Smart bot with multiple exchanges including Binance, Coinbase, Huobi, and Kraken. 3Commas also provides dollar cost averaging bots, grid bots, and options bots.

Future of Crypto Trading

As AI technology advances, more sophisticated trading algorithms will likely emerge. Current AI crypto currency trading projects have already shown the promise behind this new technology, but there’s more to come. 

Of course, there’s no guarantee that AI can help you turn a profit, but they do offer new opportunities. To take advantage of these opportunities, test out one of the AI crypto trading bots mentioned above.

But no matter how you decide to trade, make the security of your assets your first priority. Trading crypto doesn’t make much sense if your funds are never safe. The first step should always be protecting your private keys from malicious actors — and that means getting yourself a Ledger hardware wallet.

Ledger devices help you trade confidently by employing industry-leading security practices and storing your crypto offline. Your keys are the safest when you’re the sole custodian; Ledger’s hardware wallets enable that.