Ever since its launch back in November 2022, ChatGPT has created a wave of hype and speculation about the various ways artificial intelligence (AI) might be used to revolutionize cryptocurrency trading. That led to the huge boom in AI crypto tokens in early 2023, as well as the search for possible integrations with ChatGPT for crypto traders.
Here is an overview of the latest tools and techniques. These can be divided into the following three categories: crypto trading bots, decentralized finance (DeFi) bots, and AI bot marketplaces.
Crypto trading bots
Since automated trading bots are already popular with stock market investors, it's perhaps no surprise that the same tools and techniques are now being adapted for crypto trading. There are now crypto trading bots powered by ChatGPT, crypto investment portfolios designed by ChatGPT, and even ChatGPT crypto market prediction contests. Across social media, it's not uncommon to find influencers and YouTube creators touting all the ways that ChatGPT is helping to generate "insane" and "crazy" portfolio returns.
Image source: Getty Images.
It's now surprisingly easy to generate your own crypto trading bot using ChatGPT, even if you have no prior coding experience. ChatGPT is capable of generating computer code based on a simple natural language prompt.
For example, if you want a Bitcoin (BTC 1.90%) trading strategy focused on long-term returns, you can ask ChatGPT something like, "Give me the computer code for a dollar-cost averaging (DCA) Bitcoin strategy," and voilà! You will have the computer code available in seconds. ChatGPT will even tell you which parameters you will need to adjust (e.g., the "buy frequency" and the "buy amount"), as well as from where it is pulling its Bitcoin price data.
DeFi bots
AI also has the potential to disrupt the world of decentralized finance. After all, smart contracts used in decentralized finance are just small pieces of self-executable code. If ChatGPT is capable of generating the computer code for a crypto trading bot, shouldn't ChatGPT also be capable of writing smart contracts?
I experimented with a simple prompt ("Give me the computer code for an NFT smart contract that pays royalties with every NFT sale"), and again, ChatGPT immediately delivered the code. Moreover, ChatGPT knew that I was probably going to mint these NFTs on the Ethereum (ETH 2.91%) blockchain, so it wrote the code in Solidity, which is the programming language of choice for Ethereum.
CRYPTO: ETH
Key Data Points
This is really just the tip of the iceberg of what's possible with DeFi. For example, Omni is a new crypto bot for the Solana (SOL 2.92%) blockchain that will soon enable you to participate in passive income strategies such as crypto staking. This bot has been trained on data from Solana and is an expert on DeFi.
These types of DeFi bots go well beyond just chatting about DeFi -- they will soon be capable of moving funds between different crypto wallets and connecting to different DeFi protocols.
AI bot marketplaces
Not all ChatGPT-powered bots have to be used for trading, however. You can also use ChatGPT for risk management.
For example, cryptocurrency exchange Coinbase Global (COIN +3.25%) is now using ChatGPT for token risk analysis. Before adding a new digital asset to its trading platform, Coinbase is now screening it with the help of ChatGPT.
If Coinbase can use ChatGPT in this regard, why can't individual investors? One day soon, you might be able to enter the following prompt into ChatGPT: "I'm 40 years old and currently saving for retirement. Is this crypto token too risky to add to my portfolio?" -- and get a rapid risk assessment.
The place to find these bots will be on open-source code repositories such as GitHub, directly on the sites of major cryptocurrency exchanges, or on brand-new AI bot marketplaces where it will be easy to "hire" bots to accomplish certain financial tasks. Too tired to rebalance or optimize your portfolio? Just hire an AI bot to take care of that for you.
SingularityNET (AGIX 6.61%), for example, offers an expanding array of AI bots for hire on its marketplace. Right now, many of these bots focus on tasks like speech and image recognition (which AI is very good at now), but there are also some bots that claim to be very good at market and data analysis.
What to keep in mind
Just be aware that almost everything associated with ChatGPT is still very much in "beta" test mode. We don't really know how generative AI models such as ChatGPT will perform over the long term, and ChatGPT readily admits that it has not been trained on any data after 2021.
Moreover, researchers have already proven that ChatGPT often "hallucinates." In short, ChatGPT often gives a completely wrong or fanciful answer to a question without realizing it. The last thing you probably want as an investor is a chatbot that is hallucinating as it trades crypto for you.
But the really exciting thing is that every new iteration of ChatGPT (we're now at version 4) seems to get exponentially more powerful. Crypto trading bots are just the beginning. The AI cryptocurrency trading revolution is just getting started.
