February 26, 2024 andrew

Can You Use AI for Trading Crypto?

The crypto market is endlessly fascinating for true crypto enthusiasts, who are constantly studying the markets in pursuit of buying low and selling high and constantly looking for new opportunities to make it big with new coins. If you want to be truly exhaustive, this takes a lot of effort. Wouldn’t it be easier if things were simplified with automated processes that happen in the background?

This is the promise made by modern AI crypto trading tools. But how exactly do they work? Are they as effective as they seem? And are they a good tool in your crypto trading arsenal?

The Age of AI

AI is currently being used for just about everything from legal research to content generation – and it will only become more impactful from here. The AI explosion can be considered to have begun a couple of years ago, but realistically, most of us have been using tools powered by AI for almost a decade. Digital assistants like Siri are examples of everyday AI we’re already starting to take for granted. In the future, we’ll likely have access to an array of AI-powered tools to help us with almost every task.

It stands to reason that AI is already being used to exchange cryptocurrency.

The Problems With Crypto Trading

Many people see cryptocurrencies as an investment, which isn’t necessarily a bad thing for them or the world of crypto. People who made considerable money by investing in Bitcoin early helped to bring more attention to this unique market sector.

However, trading implies a sequence of relatively high frequency exchanges meant to generate profit. In other words, you’re not interested in using crypto as a currency, nor are you investing in it for the long term; you’re simply trying to make quick money by timing the market.

Timing the market in almost any market is unwise, since economics are complex and somewhat unpredictable. In the crypto world, trading is even riskier, since there isn’t much historical data to work with and markets tend to be much more volatile. It’s important to recognize that even the most sophisticated AI tools can’t change this, and by engaging in any sort of crypto trading, you’re opening yourself to significant risk.

AI for Trading Crypto: The Basics

AI algorithms have been used in investing for many years now, but only somewhat recently have they been pioneered for trading crypto. There are many different tools on the market, and all of them operate somewhat differently, though there are a few fundamentals that most of them have in common. In exchange for trading fees or a recurring fee, you’ll gain access to a platform that allows you to define your trading goals and standards, effectively programming an algorithm that acts on your behalf. Some tools may also have preprogrammed trading algorithms that you can use as you see fit.

Once established, these trading algorithms will automatically execute predefined actions at predefined times, selling when the price reaches a certain point, buying when the price reaches a certain point, or responding to changes in metrics like trading volume.

Advantages of AI for Trading Crypto

There are several advantages to this approach.

An assortment of potential products.

If you start exploring a single AI crypto trading tool, and you don’t like what you see, don’t worry. There are literally dozens, if not hundreds of AI crypto trading tools on the market. Each offers something slightly different, so if you’re willing to do your homework, you’ll probably eventually find what you’re looking for.

Near-total flexibility.

Most AI tools offer their users considerable flexibility, giving you the power to optimize the algorithm however you wish. In this context, algorithms are simply a manifestation of your own strategies and viewpoints.

Automation and simplicity.

Most people seeking these types of tools are after automation and simplicity. They don’t want to have to do exhaustive research every day, nor do they want to go through the manual process of executing trades. If you’re trading in somewhat high volume, this can save you literally hours of time.

Efficiency and speed.

AI algorithms work quickly and efficiently, with practically no delay in their actions. If you’re trying to time the market perfectly, you can rest assured that automatic algorithms are going to act faster than you.

Removal of emotions.

Every competent investor knows how important it is to control, or even remove yourself from your emotions. It’s even more important in the volatile world of crypto trading. It’s important to stick with a coherent strategy, even when you’re feeling panicked, anxious, or otherwise unsettled. By enabling an automatic algorithm to act on your behalf, you’re removing yourself and your emotions from the equation.

Constant monitoring.

Even brilliant investors don’t have the capacity to monitor the ups and downs of the market 24/7. But with the power of AI, you’ll always have an eye on the fluctuations.

Potentially higher returns.

Under some conditions, algorithmic trading may give you access to higher returns – however, this is far from a guarantee. Your results are mostly dependent on your programmatic approach.

Disadvantages of AI for Trading Crypto

However, there are some disadvantages to consider as well, in addition to the disadvantages of trading crypto generally.

Technical setup issues.

Unless you’re using a preprogrammed algorithm, you’ll have to do some technical setup work yourself. If you’re still relatively new to the crypto trading world, or if you’ve never worked with a tool like this before, there may be a steep learning curve.

Lack of good historical data.

Stock trading algorithms have the advantage of decades of historical data, but we need to recognize that cryptocurrency is still relatively new. There isn’t much historical precedent to fuel our trading decisions.

Difficulty accommodating disposition changes.

Many traders acknowledge that human intuition does matter, and once you have enough experience, it sometimes pays to act on a gut feeling. If you change your mind about your strategy, or if you just want to mitigate risk, you’ll need to make some major adjustments.

Potential technical issues.

These types of tools aren’t flawless. Technical issues and user experience problems can interfere with your ability to use them as part of your strategy.

Over optimization risks.

There is such a thing as over-optimization. No matter how much analysis you do, you can’t possibly be prepared for every conceivable future; a strategy that performed perfectly just a few years ago may be irrelevant today. If you put too much faith in an existing optimized system, it could backfire.


Most AI crypto trading bots are associated with fees. Depending on your goals and the performance of your investments, these fees may be reasonable, but they also have the potential to cut into your profitability.

Trading crypto isn’t the right financial strategy for everybody. And within this context, AI crypto trading tools aren’t a good fit for every investor. Now that you have a better understanding of the pros and cons of AI in crypto trading, you’ll be able to make a much better decision for your own portfolio. Just make sure to do your due diligence and choose a tool that’s best suited for your investing strategy.

Featured Image Credit: Photo by RDNE Stock project; Pexels; Thank you. 

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