Could Crypto Hedge Funds Use Artificial Intelligence (AI) for Trading Market Purposes?
Cryptocurrency prices tend to be influenced by many different factors and situations directly related to the market or not. However, is not so eas to identify all these issues on a chart at the time of trading digital currencies.
Several institutional professional traders use technical analysis to predict or have an idea of how the price of a specific cryptocurrency is going to perform. But ignoring the emotional aspects of the market is a big mistake.
Those that include emotional patterns into the market analysis could have an advantage over those traders and institutions that only take into account technical factors. Recognizing how feelings affect the market is positive, but it is much more difficult to understand how these emotions affect the price of specific digital assets.
A way to understand how emotions are affecting the market is analysing social media updates on platforms such as Twitter, Telegram or Reddit. These social networks are used by cryptocurrency traders and enthusiasts from all over the world. In order to analyse these trends, it is necessary for companies or traders to use artificial intelligence (AI).
Hedge Funds can have great information about the sentiment regarding digital assets by implementing an AI-based software that analyses social media and the crypto community. In the future, this could play an important role in improving hedge fund results.
According to the company Autonomous Research LLC, most of crypto hedge funds were down 50% in until August 2018. The bear market has affected several companies all over the crypto space. Including Initial Coin Offerings (ICOs) and the tokens, these projects launched to the market. Due to this situation, only the strongest hedge funds will survive this market.
As reported by Michael Baumgartner, the CEO of Augmento, an AI firm that offers proprietary software that is able to grasp market-driving emotion, sentiment analysis can be used to augment existing trading strategies based on technical indicators.
About it, Baumgartner commented:
“By scientifically analyzing the reaction of the cryptocurrency community as a whole, analysts can now finally place an ear to the beating heart of the cryptocurrency market and transform opinion into data.”