There has been quite a bit of concern over the years about artificial intelligence and its impact on investment markets. In a phrase, regular traders increasingly feel like they’re at a disadvantage as algorithmic programs that essentially amount to AI learn to make the right trades, and make them quickly. Then again, there are also some benefits for some casual investors. For instance, the popular mobile app Acorns has set itself up more or less as an automated mutual fund, investing people’s spare change on its own according to user preferences for a risky or conservative approach.
What isn’t discussed too much just yet is whether concerns about artificial intelligence in financial investing ought to extend to the burgeoning cryptocurrency market. It’s something that may in fact be worth talking about.
To this point, the biggest supposed link between AI and cryptocurrency has been something of an internet conspiracy theory. The theory is not, as one might expect, that AI programs are determining high volume cryptocurrency trades; rather, it’s that bitcoin might have been created by AI. This makes some intriguing sense on the surface because the creator of bitcoin (as well as the blockchain and by extension all other cryptocurrency concepts) is notoriously mysterious. We don’t have a full, confirmed identity for the figure, so some on the internet believe that there is no figure.
Given that the theory tends to go on to suggest that the AI that created bitcoin is attempting a slow takeover of the world, it’s fairly easily dismissed. It does at least get the conversation started about what role if any AI does play in cryptocurrency markets, and there are far more logical and ordinary places to go with that discussion.
It’s been said that there is really no effective way to predict what will happen to the value of cryptocurrency for investors. Indeed, it was phrased exactly that way in a piece at a European gaming platform, addressing a growing number of online gamers who are intrigued by cryptocurrency as a means of digital wealth storage. The idea wasn’t to make cryptocurrency appear particularly risky – merely to link it to all other kinds of investment in the sense that it’s at least something of a gamble. Even knowing the trends and factors that relate to an investment, an investor can never be certain of what’s going to happen. The question that follows is whether or not an AI might.
The general thinking is that bitcoin and other cryptocurrencies may actually be less predictable than other stocks or assets because they exist in a nearly completely independent state relative to other markets. However, one company using deep learning neural networks to predict next-day high and low prices for various assets actually suggests that cryptocurrency is correlated to other markets – 30, to be exact. That doesn’t make for a particularly large wealth of relativity, but it does give AI programs something to work with, and means bitcoin is at least somewhat predictable.
Aspects of the bitcoin market are going to be unpredictable as long as there’s emotional trading happening, and experts believe this is a style of trading that has been particularly prevalent in the last year or two with cryptocurrencies. But by analyzing all of the known influencers and correlations in a way the human mind just can’t do, an AI actually can produce at least vague forecasts for bitcoin.
It will be interesting to see what kind of accuracy these types of programs can claim once we have a larger sample size of several years’ worth of bitcoin and cryptocurrency relevance.