OpenAI launched ChatGPT in November 2022 – and it’s taken the world by storm. The AI bot is fine-tuned to write essays, scripts, and even song lyrics, but more importantly, it’s shedding light on the future of AI crypto trading. Crypto traders are starting to experiment with ChatGBT and other AI tools as crypto trading bots.
While the technology is still in its early stage, many are wondering if AI crypto trading is the future. To help answer this question, we did a deep dive into the pros and cons of using artificial intelligence. First, an introduction.
What is ChatGPT?
ChatGPT stands for Chat Generative Pre-trained Transformer. OpenAI, its parent company, is led by big names such as Elon Musk, Sam Altman, and Ilya Sutskever. The chatbot uses reinforced and supervised learning techniques to generate all kinds of text. It responds to a human’s prompt with intelligence, and it can even fix bugged computer programs.
ChatGPT is pretty new – only operating for a few months and with limited data available. Hence,
it can sometimes produce incorrect answers. However, as it keeps learning from prompts and new data, the chatbot becomes smarter.
Right now, it’s free to use. It works best in English, and all you need to do to access it is create an OpenAI account. In the future, the artificial intelligence platform may become a paid service costing upwards of $40 per month.
The public’s reaction to ChatGPT is mixed but mostly positive – with concerns including ChatGPT creating phishing emails, advanced malware or a plagiarism culture.
These are possible issues that its founders will have to address. For now, though, people are having fun pushing the limits of this new technology – including crypto traders.
How to use ChatGPT crypto trading
In an attempt to get an edge over the competition, crypto traders are starting to turn to ChatGPT for AI crypto trading advice. The AI-powered tool uses real-time data to craft its responses and it improves every day.
The chatbot can assist traders in making quick and knowledgeable decisions before they trade. Crypto experts are training ChatGPT to better suit crypto trades using Pine Script, a computer language developed by Trading View.
The chatbot then created a basic trading bot that forms useful trading instructions based on market data about Bitcoin and other popular cryptocurrencies.
What questions can you ask ChatGPT about crypto trading?
You might ask ChatGPT about the current investor emotions about Bitcoin, for example. You could also input key commands that instruct ChatGPT to give you a good analysis, such as ‘market capitalization’, ‘risk profile’, or ‘Bitcoin prices’. You can also ask the bot to explain certain terms, concepts, or crypto events to you. Twitter users even created an AI trading terminal, using ChatGPT to write the script code. The terminal displays current information about BTC/USDT (Bitcoin/tether stablecoin) orders.
Other than being a crypto educator and scriptwriter, the artificial intelligence bot might be useful in writing smart contracts. Smart contracts keep crypto transactions safe, secure, and speedy.
Suggested Reading: Smart Contract Examples: 7 Interesting Use Cases
Lastly, all these potential uses are exciting to DAOs too (decentralized autonomous organizations). DAOs can make decisions using smart contracts, which may improve transparency and security.
Do AI crypto trading bots work?
We know that AI crypto trading bots work; in fact, they’ve been around since the 1980s. They read algorithms and made stock market predictions. Of course, those bots weren’t as sophisticated as what we have now. However, they still demonstrate a proven history of use.
Now, we can use AI bots to make long-term financial plans and automate secure crypto trades. With so much data now available, it would be impossible for any human to keep up. AI can analyze vast amounts of data and algorithms and condense them for us.
Using AI crypto bots is also totally legal – at the moment. There are many beginner-friendly options. Traders often use AI trading bots to pull off harder strategies. Arbitrage is one common example; when you buy at a low price and wait for a peak to sell.
Suggested Reading: How to Find the Best Crypto Arbitrage Strategies
You can use AI to set up take-profit orders that automatically sell crypto, instead of staying glued to the screen.
Day traders often use scalping to make small but quick profits. This involves buying and selling the same assets multiple times a day.
The prices can vary, and so can profits – and you have to be agile at analyzing the data. Day traders use AI bots to trade for them to make this strategy more viable. Bots especially help at night, earning you a profit while you’re fast asleep!
All that being said, AI crypto trading is far from perfect. There are several pros and cons to consider before trying it.
Pros and cons of AI crypto trading
Pros of AI crypto trading
- Minimize risk: Use AI to sell or buy your assets at the best times, ensuring you don’t lose too much. In times of market volatility, keeping your funds safe from rapid price drops is crucial.
- Easily strategize: AI trading bots make it much easier for traders to pull off strategies that require constant attention. They also help analyze algorithms and trends, so traders can make good decisions.
- Straightforward education: There’s so much to learn about cryptocurrency, and beginners can get overwhelmed. Use AI like ChatGPT to get custom informational explanations.
- Customizable: Traders can customize their bot’s functions to suit their personal needs.
- Keep transactions secure: Some traders use crypto brokers to watch over their assets and make trades. However, there’s always a chance of human error or malicious intent. With bots, you can trust your assets are traded on your terms only.
- Multiple options: There are a variety of AI trading bots and platforms to choose from. You can use more than one, or try out your options until you find the right choice.
Cons of AI crypto trading
- Complex for beginners: While AI bots can help beginners with educational purposes, they are more complex for actual trading.
- Require programming knowledge: To customize or create your own AI trading bot, you need experience with programming languages. While asking another bot to create software is possible, it might have errors.
- Tedious programming process: Programming your custom bot also takes some time, and it can become tedious. You might have to experiment to learn how to manage the bot without any errors.
- Limited cryptocurrencies: There are many cryptos to choose from – over 21,000 in circulation! While there are also many AI trading bots, they aren’t compatible with every cryptocurrency out there.
Alternative to AI Crypto Trading
We are not tinfoil hat-wearing conspiracy theorists here at YouHodler. We don’t think AI will take over the world and certainly not over the crypto trading industry. We think it has great potential. However, we are willing to admit AI crypto trading is not 100% ready.
The human mind is still the most intelligent piece of “technology” out there. In terms of crypto trading, there are no limits to the human mind, making it the best alternative to AI crypto trading there is.
YouHodler’s Multi HODL trading tool does not feature any AI elements – at the moment. With low minimum trading limits, anyone can play with Multi HODL in a “trial and error fashion.” The best way to get good at crypto trading – or anything for that matter – is practice.
With Multi HODL you can practice as much as you want with hundreds of pairs to choose from including:
- Crypto/crypto (e.g. ETH/BTC)
- Crypto/stablecoin (e.g. BTC/USDT)
- Stablecoin/Stablecoin (e.g. EURS/USDT)
While Multi HODL does require knowledge of the currency markets, we make it as simple as possible. It even includes some automated elements. Crypto traders who are looking for the ultimate mix of convenience and power will find both in Multi HODL.
If you want to use AI trading bots to gather information so you can make better Multi HODL decisions, then we encourage you to give it a try. But for now, just remember AI doesn’t guarantee anything and ultimately, it’s up to the human mind to make final decisions.
Disclaimer: “The content should not be construed as investment advice and does not constitute an offer or solicitation to offer or recommendation of any investment product. It is made available to you for information and/or education purposes only.
You should take independent investment advice from a professional in connection with, or independently research and verify any information that you find in the article and wish to rely upon.”
