AI + Crypto = ???
AI on Crypto Market: Agents, Prompts and Skepticism
Cryptocurrency is one of those topics that we rarely mention here but today AI is one of key narratives in Crypto and we want to check what’s going there.
Of course, we'll do this with a degree of common sense skepticism.
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AI Agents | The New Trend in the Crypto Market
According to Kaito, in early December 2024, the AI and memecoins narrative captured more than half of the 'crypto Twitter' mindshare.
And it's all thanks to cryptocurrency AI agents. They function similarly to bots but use LLMs for interaction, which investors love. Agents also have the autonomy to perform various tasks such as analyzing the blockchain, providing contextual responses on social media, and participating in trading operations.
How it Works in Real Life | AI Agent Tool
So, the case we are talking about was recently published as a thread on X. In less than a week, he went from $3.1K to $12.8K using an AI agent for trading.
We are not offering the information below as a strategy or financial advice. And while it looks very plausible, we can't rule out that it's a fake.
The thread's author experimented with “Sniper,” developed on the Griffain platform. It’s trained on data from Pump.fun and can identify patterns of which types of memcoins are rising, which ones are falling, and so on.
When you give it access to your wallet, you can implement a trading strategy using prompts. Like this one:
I’ve put [Amount and currency] in our shared wallet. Analyze new memecoins as they launch on Pump.Fun and only invest in them if you think they’re likely to increase by at least [The percentage you choose] in the next [number] days. And invest a maximum of [Amount and currency] per memecoin.After that, the AI agent will start working and follow your instructions.
The main thing to remember is that AI is not omnipotent, and you cannot ask it to “invest in the next Bitcoin.” Such an approach is likely to fail.
However, the author managed to pick the correct prompts and multiplied a lot of capital in just four days. Here is his result:
Once again, don't take it as 100% truth.
That's the way it is. If you have a great desire (like me) to test this AI agent, we must disappoint you. At the moment, Sniper is in the closed testing stage with invite-only access.
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AI Projects to watch in Crypto in 2024
AI crypto tokens represent a niche segment of the cryptocurrency market that combines blockchain technology with AI. They serve multiple purposes within AI-driven projects and ecosystems. Here are the tokens that performed the most outstandingly in 2024.
Virtuals Protocol (VIRTUAL): An AI-focused launchpad on Ethereum's Layer 2 network, Base, enabling users to create and monetize AI agents without technical skills. Its VIRTUAL token acts as a governance and utility token.
Increase in market cap during the year: +3,500%.
Fetch.ai (FET): A decentralized platform for autonomous economic agents operating across multiple blockchains. Recently merged with SingularityNET and Ocean Protocol to form the Artificial Superintelligence Alliance, it allows users to create agents for data sharing and resource management.
Increase in market cap during the year: +930%.
NEAR Protocol: A scalable blockchain designed for decentralized applications, particularly AI. Its technology improves transaction speed and reduces costs, making it an attractive platform for developers building AI apps.
Increase in market cap during the year: +256%.
Render Network (RNDR): It’s a network that connects users needing GPU rendering power with GPU owners, using the RNDR token for transactions. This decentralized platform provides rendering services for 3D graphics and AI computations, incentivizing GPU providers while ensuring fair compensation.
Increase in market cap during the year: +221%
Bittensor: A protocol that incentivizes machine intelligence development through a mining system. Users earn TAO tokens by providing computational resources or developing neural networks.
Increase in market cap during the year: +147%
The overall AI token market growth rate is expected to increase at a CAGR of 208% in 2024.
Common Skepticism
In terms of challenges, AI in the crypto market has the following drawbacks:
- AI relies on historical data and patterns, which may not always predict the wild, real-time fluctuations driven by news, market sentiment, or regulatory developments.
- AI agents today are primarily limited to executing strategies that follow established patterns or mimic successful traders, often called copy trading.
- In some cases, AI works as buzzwords that attract funding and attention by offering solutions that don't solve commerce's complexities.
Nevertheless, in some cases, these shortcomings do not prevent investors from profitably using AI for crypto trading. And it's always best to be prepared in advance.
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Lets be honest, all these use cases of AI agents in crypto are barely useful at the moment. But there are some simple AI use cases which you can apply to learning and building in crypto & web3.
How Everyone Can Use AI for Crypto (With Free AI Tools)
Analyzing Current Events Affecting Crypto Market
And we start with my favorite AI tool: Perplexity (but you can also use ChatGPT Search, Microsoft Bing, or another AI search engine). AI can analyze real-time data from various sources to track current events impacting the cryptocurrency market. This includes sentiment analysis from social media, news articles, and forums.
Usage scenarios:
- Market Sentiment Analysis: AI evaluates tweets, news headlines, and blog posts to gauge the sentiment around specific cryptocurrencies or the market as a whole.
- Event Impact Prediction: Predict how events like regulatory announcements or economic policy changes might affect crypto prices.
To make it clearer to you where to start, use these prompts:
"Summarize the latest news on cryptocurrency regulations in the EU and their potential impact on Bitcoin and Ethereum.""Analyze how geopolitical tensions in the Middle East are affecting [Currency] market sentiment today."Perform sentiment analysis on recent news articles and social media posts about [specific cryptocurrency]What are some suggestions for diversifying a cryptocurrency portfolio?This will make it much easier for you to identify non-obvious correlations between events and changes in the market.
White Paper Analysis with ChatGPT
White papers are often dense and technical, so a quick summary is a great place to start. You can input large sections of the white paper and ask ChatGPT to summarize it in a digestible format. Just use this prompt:
Summarize this white paper. Focus on the project's goals, technology, and the problems it aims to solve.Then, you can extract some details to compare with other projects.
Extract the key information from this white paper, such as the problem the project is solving, its technology, tokenomics, and the team behind it.And here are some additional prompts for further analysis:
Does this white paper use clear, detailed language, or are there areas with vague or overly promotional language?Are there any potential red flags, such as unrealistic timelines or lack of details about the team?What are the potential risks of this project in terms of scalability, security, and competition?By utilizing specific prompts like those listed above, you can gain a much deeper understanding of a crypto project.
Technical Analysis with Chart Images
You can also use ChatGPT for technical analysis (TA) with chart images by uploading a screenshot of your crypto chart and asking specific questions. ChatGPT can help identify patterns such as head and shoulders, triangles, or double tops/bottoms and give recommendations based on these formations.
In addition to pattern recognition, AI can analyze candlestick formations like Doji, Engulfing, or Hammer and provide insights on their implications for price action. It can also help identify support and resistance levels, trend lines, and key indicators like RSI or MACD.
Finally, ChatGPT can assess volume trends to evaluate the strength of a move and detect divergence between price and technical indicators, signaling potential reversals. Using prompts like, “Is this a golden cross?” or “Should I enter based on this breakout?” you can receive insights to make trading decisions.rusted professionals' latest YouTube videos, articles, and post
Synthesizing Information
As mentioned in a previous post, NotebookLM excels at synthesizing information from multiple sources into cohesive and actionable reports. This is invaluable in crypto, where understanding diverse datasets can make or break a strategy.
Simply upload the latest YouTube videos, articles, and posts from trusted professionals. Then, use the structured information to obtain the desired data.
In this tool's case, the prompts' wording will depend on which sources you use. But if nothing comes to mind, you shouldn't worry. NotebookLM will suggest options and point you in the right direction.
NotebookLM’s ability to synthesize vast and fragmented datasets allows you to create comprehensive, data-driven reports tailored to specific crypto topics. This goes beyond analysis, enabling strategic decisions backed by insights from multiple angles. We covered more about this tool here:
Final Thoughts
So, what is AI + Crypto? Many call it “the future of the Internet and trading,” but we aren’t sure we will agree readily. However, we are at the beginning of a big trend that is worth following here and now. And if not to get rich, at least to identify scam projects like Humanized AI.
In case you missed it, read about this startup at your leisure. Remarkable story about stealing $665K and the disappearance of a company.
The crypto space is notorious for its volatility, misinformation, and hype. While AI can synthesize information and predict trends, its outputs are only as reliable as the data fed. So, always keep your eyes open.
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This article was first published in the Creators AI newsletter. View the original edition.
