Yahoo Finance 3 Mistakes To Avoid When Using AI To Invest in Crypto
Thanks to the quick evolution of artificial intelligence (AI), many aspects of life are being streamlined. By hastening processes, AI is helping everything from work to trading and investing.
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While the technology can be extremely helpful when it comes to investing in crypto, though, experts say there are pitfalls to avoid.
“AI excels in a variety of areas when it comes to crypto investing. It can analyze market sentiment faster and with greater accuracy than a human investor,” said Brian Prince, co-founder and CMO of XCoins, founder and CEO of TopAITools.com It can spot trends. For instance, he said, it can be used in robo-advising, allowing you to take a hands-off approach to crypto-investing.
“But there are some pitfalls to watch out for,” he added. Here are some of them.
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1. Selling Too Soon or Day Trading Without Experience
According to Prince, crypto investing, like other investments, should be approached with a long-term view. Yet, because AI investment platforms make it easy to perform high-frequency trades, it can be easy to try to “play the market,” he added.
“I prefer Warren Buffett’s philosophical approach to investing — whether it’s stocks or crypto. Never buy an investment for a minute that you wouldn’t want to hold for 10 years,” he said, noting that it’s important to keep an eye on long-term gains.
“Just because you can try and time the market and buy and sell frequently through AI, this may not be the best strategy, depending on your risk tolerance and financial situation,” added Prince.
Prince also noted that while some short-term, higher-risk investments can help you grow your money faster, crypto is highly speculative.
As such, never invest more than you can afford to lose, especially if you are looking for short-term gains by timing the market with the help of AI, he added.
2. Don’t Trust It “Blindly” and Do Your Research
Vijay Marolia, founder and chief investment officer of Regal Point Capital Solutions, recommended not trusting it for advice. Instead, he suggested using it for research, data entry and/or analysis.
“Don’t forget to double check anything that sounds crazy or unreasonable,” added Marolia. “AI uses LLMs [large language models] that have the tendency to make up information — these are known as hallucinations within the world of AI.”
John Patrick Mullin, CEO and Co-Founder at MANTRA Chain, echoed the sentiment, saying that while integrating AI into your investment strategy could prove helpful, “AI is not a crystal ball.”
“Investors should first test out the theory,” said Mullin. “Most times, what sets a clear distinction between wins and losses in crypto is proper research. Smart investors will leverage AI insights as a starting point for further research and due diligence before making any investments.”
In turn, John Matze, co-founder of social network Hedgehog said that it’s really important to approach trading and investing the old-fashioned way — that is, to do as much research as possible before making any financial decisions.
“AI platforms like ChatGPT and Gemini should be thought of as a tool to assist with your work, not necessarily something to rely on,” he added.
3. Forgetting to Monitor Your Investments and Neglecting the Help of Human Advisors
Another pitfall to avoid, according to Prince: AI can also make it tempting to neglect your investments.
In turn, he said that it’s imperative that you regularly track your investments to gauge their performance and make adjustments as needed.
Along the same lines, neglecting the help and assistance of human advisors, is also something to keep in mind.
“It’s important to recognize when you may have a complex financial situation that requires professional guidance from a human,” he said, adding that crypto investing, especially, is fraught with ever-evolving tax ramifications that may require advice from experts.
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This article originally appeared on GOBankingRates.com: 3 Mistakes To Avoid When Using AI To Invest in Crypto
