For quite a while now, artificial intelligence has been in focus for the financial community, with the implicit promise that new technologies will help parse market context to provide insights.
Now, some experts are setting their sights on the use of AI for cryptocurrencies.
“With the resounding return of Bitcoin’s volatility amid an ever-hotter crypto market, hedge funds and asset managers are increasingly turning to software developers to help them interpret and harness sentiment signals to their advantage,” writes Marie Huillet today at Cointelegraph.
Part of the idea is that the newness of cryptocurrency and its reliance on investor whims makes this a good fit for AI sentiment analysis.
Experts also point out that the lack of some traditional models makes sentiment analysis a more appealing solution.
Even though the development costs of one of these robots can cost up to $1 million, serious trading parties are getting interested.
“This fragmentation and vibrancy of the social media landscape,” Huillet writes, “ — extending beyond Twitter to Reddit, Russian-developed Telegram, Japan’s Line, Korea’s Kakao and China’s WeChat, and many others — presents significant complexity for the Sherlocks of sentiment analysis.“
For example, Coin Metrics and Social Market Analytics have developed a technology harvesting Twitter feeds for sentiment insights.
“As the crypto investing market continues to mature, institutional investors are demanding data from trusted partners. These institutions are looking to make data-driven decision (sic) by accessing sources of data that they understand from their legacy investing frameworks,” said said Tim Rice, Co-Founder and CEO of Coin Metrics in a press statement in June on the collaboration announcement.
“We believe that the power of combining sentiment data with granular network and market data is fundamental to building a deeper understanding of crypto assets. Coin Metrics is excited to partner with SMA, who has a long history of providing sentiment data to traditional capital markets participants and share Coin Metrics’ principles and values. The ability to provide an all-in-one crypto financial data solution is a huge convenience for institutions.”
Could these types of AI analysis help traders to compete? The buzz around these tools suggests that top desks that don’t pony up may be left in the dust. Stay with us as we continue to follow how AI is making waves in crypto market activity.