The Future of Crypto Trading: How AI-Based Tools Are Changing the Game

When ChatGPT first appeared in November 2022, it immediately set off a speculative frenzy in the crypto world. People intuitively knew that the rules of the game had changed, and the rush was on to find the most effective ways to harness the seemingly unfathomable power of ChatGPT to trade crypto.

In the last six months alone, we’ve seen an influx of AI-powered products either influenced by or powered by ChatGPT. Here’s a closer look at what’s available today.

AI tools from big tech

The first category of AI-based tools includes those offered by large technology companies. These tools are meant to integrate with your current workflows and are probably the most accessible to the everyday investor. Microsoftwhich has invested over $10 billion in OpenAI (creator of ChatGPT), stands out in particular for how quickly it has embraced AI.

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In addition to using ChatGPT to change the Bing search experience, Microsoft is actively working to integrate ChatGPT functionality directly into Office productivity tools such as Excel. If you currently use spreadsheets to track your investments or come up with new trading ideas, this could be a game-changer. Using Microsoft 365 Copilot, you can analyze Excel spreadsheet data using natural language. So, for example, you can ask a question like, “Why is the revenue for Coinbase Global improve this quarter?” and you’d get a pretty sophisticated response within seconds.

Crypto trading bots

The next category of AI-based tools includes crypto trading robots. These bots can either be hosted directly on a cryptocurrency exchange, or they can be integrated with a cryptocurrency exchange via an API. In basic terms, these crypto trading robots execute a specific trading strategy that you designate. While many of the readily available trading strategies are designed for short-term investors, there are actually some crypto trading robots that are designed to execute dollar cost averaging strategies, making them more suitable for long-term investors.

Things get really interesting when you add ChatGPT into the mix. Automated trading bots are nothing new, but ChatGPT powered trading bots are. What many may not realize is that ChatGPT – in addition to generating traditional text-based content – ​​is also capable of generating computer code. Thus, you can write a message like “Give me the computer code for a momentum trading strategy for Bitcoin” into ChatGPT and it will generate the correct data code.

When I used this script on ChatGPT, for example, it wrote the code in Python and optimized it for trading on Binance. Once you have the code, you can start doing some really interesting things with it, like optimizing it for a particular variable or testing it on past market data. Once you are satisfied with the strategy, you can put your crypto trading bot to work.

AI, social media and crypto

While there are some trading platforms that already enable you to tap into the “wisdom of the crowd” to make better investment decisions, I think the real innovation is going to come via social media platforms like Twitter. Being able to tap into the raw data of what people around the world are saying about a particular crypto can be invaluable. You literally have your hands on the pulse of the market, and AI tools allow you to analyze it 24/7.

That’s why I’m keeping an eye on the recent Twitter crypto trading integration with eToro, a social investment platform that specializes in letting you track, follow and mimic the trades of others. Right now, if you type “$ETH” into Twitter search, you’ll get a trading chart with it Ethereum, along with a long list of recent tweets about this crypto. Soon you will be able to trade Ethereum with your eToro account (if you have already set one up) directly on Twitter. It’s easy to see how AI-powered Twitter could make this whole process even more powerful and streamlined, especially given Elon Musk’s fascination with artificial intelligence and meme coins.

Buyer beware

While all of these developments around AI are certainly exciting, there are obviously a number of factors to consider. First of all, remember that ChatGPT is only trained on data through 2021, so it has little or no idea what has happened in the world since then – like the great crypto meltdown of 2022!

Second, remember that the crypto space is rife with scams, so be careful where you put your money. Crypto trading bots are particularly vulnerable to these scams. The BBC, for example, recently profiled the case of a crypto trading bot that lured in tens of thousands of users worldwide before people realized it was a giant Ponzi scheme. So always do your due diligence.

That being said, I am extremely positive about the future of crypto trading and the new AI-based tools that are starting to appear in the market. As long as you take some of the more outlandish claims with a grain of salt and keep an eye on long-term returns, these AI tools can offer a powerful way to supercharge your crypto portfolio.