AI Can Amplify Benefits and Temper Risks of Bitcoin Investing

Bitcoin traders have found that AI technology has significantly helped boost their profitability.

10 Min Read
Shutterstock Photo License - Alexander Limbach

AI technology has been invaluable to the financial industry. The amount of money that fintech companies are spending on AI is projected to grow by 16.5% a year from 2022 and 2030.

AI is changing the alternative financial sector as well. For example, many bitcoin investors are finding creative ways to use AI to improve their trading strategies. In fact, AI has played a key role in the growth of bitcoin popularity.

What Are Some Ways that You Can Use AI in Your Bitcoin Trading Strategy?

There are a number of ways that you can use AI technology to improve your bitcoin investing strategy. Here are some ideas.

Use AI to Automate Your Trading Strategy

One of the biggest benefits of AI is that it can automate your bitcoin trading strategy. AI-driven trading systems like Immediate Edge have made trading easier than ever. As we stated before, AI-based bitcoin trading can disrupt the bitcoin market.

AI-based trading systems help you take advantage of the volatility of the cryptocurrency market and make large amounts of profit. The software uses multiple market parameters and critical market data to break down and analyze market movements. AI-driven bitcoin trading application can perform all the heavy lifting for you, from speculating on market fluctuations to taking out profitable trades and executing them.

You don’t have to do anything because all the work will be done by the system itself. Just sit back and enjoy or monitor your profits. The algorithm technology has great accuracy in detecting market rates to give you peace of mind for investing. This bitcoin robot provides the same opportunities to both experienced and inexperienced.

The process is very simple, the software buys the most active cryptocurrency of each moment and sells it when it increases in value. Before selling an asset, the algorithm takes into consideration the price of that asset on all cryptocurrency exchanges and sells it on that exchange where its price is higher.

Predict Price Movements with Predictive Analytics

AI has also led to the inception of predictive analytics technology, which can also help bitcoin investors. Predictive analytics algorithms are able to evaluate a number of different variables and identify future price movements. This can help you take advantage of market inefficiencies.

Since bitcoin is a much less efficient market than stocks and bonds, it is a lot easier to exploit new information to make a profit. AI-driven technology can help if you are willing to invest in predictive analytics.

What Are the Benefits of Using AI as a Bitcoin Investor?

There are plenty of different reasons you may want to consider investing in Bitcoin. These benefits will be even more significant if you are willing to invest in AI technology to support your bitcoin trading strategy. Some of the arguments for buying Bitcoin are listed below.

Inflationary Hedge

One of the main reasons to consider buying Bitcoin has to do with there being a finite number of Bitcoin out there. Whether fiat currency always has an inflationary risk because more can always be printed. Monetary and fiscal policy can drive the overall value of the dollar to decrease. You can boost your returns even more by using AI, which makes it an even better inflationary hedge.

Limited Supply

Bitcoin will never have this inherent risk attached to it. There are only 21 million bitcoins and as many as 3.7 have been likely permanently lost. As a result, there’s only going to be 17.3 in circulation at any given time.

Transactional Usage

AI isn’t the only new technology that is helping with bitcoin trading. Blockchain is also extremely important for cryptocurrency investors.

There is a lot of hope that one day Bitcoins will be used for transactions on a wide scale. As Bitcoin gets increasingly mainstream, it can be used for more and more transactions whether you are paying for a movie ticket or something else. It’s getting more mainstream attention as you’ll find it showing up on popular and widely used financial sites alongside the stock market and precious metals.

Bitcoin is inherently more secure because of its blockchain technology. The blockchain technology used in Bitcoin is completely decentralized. Thus, it makes for a much more secure way to complete transactions. This also allows for transactions to go smoother without middleman interference and fees being imposed.

Digital Gold

There is a lot to like about Bitcoin having a finite supply. Because of this, it’s been seen as the digital version of gold. Being compared to gold is always a plus because gold has been a tremendously stable store of value dating back to 550 B.C. While Bitcoin is relatively new in comparison, it’s much easier to use in day-to-day transactions than gold has ever been with the use of a crypto trading app.

As you can see, there are plenty of strong arguments as to why Bitcoin could be a good investment decision. However, there are equally as many reasons not to buy Bitcoin and these arguments could be considered even stronger. These include:

Bitcoin Is Overbought

One of the things you don’t want to do is buy at the peak of bull markets. Bitcoin is up a lot over the past 5 years or so. Because of this, you could be buying way too high which can expose you to a lot of unnecessary risks. Since May 19, 2020 Bitcoin is up 7,876%.

You will want to use AI-driven trading strategies to better anticipate future price movements, so you can purchase at the right time.

The Risk to Reward Is Skewed

One of the biggest reasons to avoid buying Bitcoin right now is because it’s priced too high that the risk-to-reward ratio is skewed. Bitcoin cannot continue to surge in value as it has in the previous 5 years. While it’s impossible to predict the price movement of any asset, it’s reasonable to expect Bitcoin’s value to not continue going up in a straight line. If it continued to grow as it did in the previous 5 years, it would put the total value of Bitcoin at $88 trillion in only 5 more years. This is nearly impossible to think about considering that’s over 4 times the USA’s Gross Domestic Product for the year 2020. It’s simply not going to happen and the mania days resulting in exponential growth are likely over.

There’s More Competition

In the earlier days, Bitcoin was one of the only cryptocurrencies out there generating a lot of appeal among investors. Nowadays, you will find a lot of cryptocurrencies available and there are limited barriers to entry for making new ones. This has led to the entire market being flooded with cryptocurrencies. For instance, Dogecoin was created as a meme and it achieved a $43 billion valuation as of May 18. Ethereum is another that has a value nearing half of what Bitcoin is worth. And Ethereum utilizes a similar decentralized payment network and has other applications like smart contracts that make it highly intriguing.

The Crackdown Could Happen At Any Moment

Global governments can crack down on the cryptocurrency market at any time. It’s an unregulated space. A lot of governments could eventually ban cryptocurrencies. The crypto space already has the IRS’ attention.

Hyperinflation Fears Have Always Been There

There’s always been this talk about hyperinflation and about how the value of the dollar is going to tank and plummet. However, to this point, it has never occurred. A lot of people have been investing in precious metals like gold because of this with minimal returns.

The Volatility

Bitcoin is easily one of the most violative assets out there. Bitcoin can make the stock market look stable with how volatile it is. Cryptocurrency is a pure speculation play at this point and not many people want to put their money into something that carries so much risk.

AI Technology is Changing the Future of Bitcoin Trading

A growing number of bitcoin investors are taking advantage of the benefits of AI technology to improve their strategies. AI-driven trading can help bitcoin investors boost profitability considerably.

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