Agentic artificial intelligence takes automated trading to a new level. Unlike trading bots that follow preset rules, AI agents can actually act on decisions they make, trading according to market conditions and learning from mistakes. AI agents can react to shifts in the market in real time, analyze data, form plans, and execute trades.
Image source: Getty Images.
Customers of several brokerages, including Robinhood (HOOD -0.05%), can now connect AI tools such as Anthropic's Claude or OpenAI's ChatGPT to their accounts. Users move funds into their AI agent account and give it instructions for how they want it to trade. Robinhood CEO Vlad Tenev wants AI agents to be able to do everything humans can. He aims to give retail investors the same computing power as institutional investors.
NASDAQ: HOOD
Key Data Points
Here are some of the ways agentic AI trading could transform not only crypto investing, but all investing -- for good and bad.
How AI agents can impact the crypto industry
Cryptocurrency investing is always a wild ride, but the growth of agentic AI trading could make it even wilder. Having multiple AI agents automatically trading crypto in milliseconds on the back of breaking news or price movements could amplify price swings and quickly reduce liquidity, particularly if many traders have set up similar AI instructions. Many crypto investors have witnessed firsthand how automated liquidations can spiral rapidly into flash crashes.
AI agents are also likely to trade more, meaning higher trading volumes and more transaction fees -- which is good for exchanges like Robinhood. For example, AI-controlled exchange-traded funds (ETFs) tend to turn over their holdings once a month, compared to once a year with ones managed by humans. For crypto investors, that could also mean a huge jump in the number of decentralized finance (DeFi) transactions, boosting programmable cryptos like Ethereum.
On the plus side, AI agents can quickly detect and react to price discrepancies, contributing to price stability. They also take some of the emotion out of trading and help investors stick to preset strategies.
How AI agents could impact your investing
From an individual point of view, AI doesn't change the Foolish investment philosophy, which is to buy and hold quality assets for at least five years. Making consistent investments into companies or cryptocurrencies you have researched is a more reliable way to build wealth than short-term trading. That holds true even if AI helps.
One key issue is that AI can sound confident even while making big mistakes. Most importantly, AI can help, but it is you who needs to decide which companies you will invest in and why. AI can certainly deepen your research, analyze large amounts of data, identify risks and opportunities, and help you build a balanced portfolio. You might, for example, ask an AI agent which brokerage stocks are best positioned to benefit from AI agent trading, how the trend might evolve, and how you can invest.
Ultimately, AI is a powerful tool, but it is in its early days. Just last week, an AI model broke out of its sandbox and hacked another firm, seemingly with no human intervention. I don't think a rogue AI is going to steal your credit card information and use it to book a luxury holiday, but the incident does raise questions about what else AI agents might do in terms of market manipulation or investing all your funds in a meme coin because it misreads the market.
