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Best Crypto AI Trading Bots — Review [2024]
When it comes to dominant crypto narratives, crypto artificial intelligence (AI) has undoubtedly been one of the most popular focal points in recent memory. This can be highlighted by the notable crypto data aggregator CoinGecko, which found that crypto AI was the most dominant narrative in 2023, taking up an 11.3% share of web traffic.
But it's important to note that crypto AI is a broad church in itself, and there are various different crypto AI products, including decentralised AI services (Singularity AI), crypto AI platforms to build apps and services (Fetch AI), or platforms to create decentralised machine learning networks (Bittensor); to name a few.
But for the average crypto retail investor/trader, nothing has been more compelling and interesting than crypto AI trading bots, and there have been various exchanges and platforms that have released AI trading products for the crypto space. The problem, however, is that AI crypto is still a nascent sub-industry, meaning not enough time has passed for market dominance to be established. This means users are often going into this blind, and with little evidence guiding them.
But fear not!
In this article, we’ll take a deep dive into:
- What is a Crypto AI Trading Bot?
- What to Look For When Choosing a Crypto AI Trading Bot
- Which AI Tool is Best for Crypto Trading?
- Are Crypto AI Trading Bots Ideal For Beginners?
Let's dive right in!
What is a Crypto AI Trading Bot?
Put simply, a crypto AI trading bot is a tool that uses AI to analyse and evaluate the crypto market in order to identify trading opportunities with good return on investment (ROI) potential.
What makes these bots unique is their use of machine learning to enhance trading strategies by absorbing data over time; making them much more efficient than traditional trading bots. This in turn can result in crypto AI trading bots identifying positive and negative historical patterns, as well as avoiding previous mistakes. This in theory can increase the likelihood of users making higher returns on each trade.
However, it's important to understand what AI actually does. Many crypto AI trading products, rather than using artificial general intelligence (what is what most people incorrectly assume AI is), primarily use language learning models (LLMs). These LLMs are mostly powered by Open AI's GPT4, and simply identify patterns in past and present data in order to produce human-like responses. So although the quality of data analysis tends to be very good, AI in its current form does not have human-level reasoning (yet).
Benefits
1) Superior data analysis & decision making: Because crypto AI bots are essentially using LLMs, they can analyse far more data than what human traders can do (and in a shorter time frame), make less mistakes (if at all), and are able to provide superior data-driven trading advice.
2) Backtesting: A lot of crypto AI trading bots allow users to backtest strategies using trading data from the past, and what this does is allow traders to strengthen their algorithms before using real money to trade.
3) Automation & efficiency: Another benefit of using crypto AI trading tools is that they can automate trading based on predefined (or autonomous) strategies without a human having to be there. This means traders can take advantage of trading opportunities whilst they sleep.
What's more, transaction fees can be lowered as AI bots can find the most cost-effective avenues for trade execution. This usually involves identifying the cheapest exchanges, minimising slippage, and identifying the optimal time to make a trade.
These bots are also super good at multitasking, and can save traders a lot of time and hassle in this regard.
4) 24/7 Market Monitoring: Crypto markets operate on a 24/7 basis, and therefore provide different opportunities throughout the day and night. The problem is that human traders need to sleep, and will often miss trading opportunities during this period. So what some AI crypto trading bots can do is to continuously monitor the market, and make trades at any time; making sure no optimal trades are missed.
These bots are also theoretically capable of detecting flash crashes, and do this by analysing market depth and other on-chain data. Detecting early signs can help to avoid losses.
5) Faster trade execution: Crypto AI trading bots can also make trades at an insanely fast speed, which can bring about a significant reduction in the time between decision making and making a trade. This instant ability can be incredibly useful during volatile times in the crypto market, and give an AI trading user a competitive edge over human traders.
Drawbacks
1) Complexity: The first drawback is that some crypto trading bots that leverage AI can be difficult to configure, and especially for novice crypto traders. Whilst the learning curve is steep for new traders on regular crypto trading platforms, it is even steeper when it comes to using some crypto AI bots.
2) Experimental: Because crypto trading bots that use AI are still very much in their infancy, they cannot be considered to be infallible, as not not enough time has passed in order to collect a large enough sample size to determine whether they are proven tools. Furthermore, AI technology in general is still in its infancy, and most products are essentially still in their testing phase, and use basic forms of AI (LLMs).
3) Becoming overly dependent on automation: While AI trading bots can multitask far better than a human can, and are very efficient when analysing large samples of quantitative data, crypto traders should not become overly dependent on them either. This is because the cryptocurrency market can change rapidly, and quite often the triggers cannot be identified by quantitative data alone.
4) Lack human-level emotional intelligence: Because most crypto AI bots solely use LLMs (AGI is still far away), these bots lack the same level of emotional intelligence that humans possess. So although high-quality price analyses can be made using quantitative data, the crypto market is also driven by qualitative factors as well, and AI cryptocurrency trading bots simply cannot gauge this sentiment to the same degree humans can.
5) Cost: Because many AI trading bots come with subscription fees or performance-based fees, the amount traders spend over time can add up. So unless a trader is trading a large amount, then these costs can potentially reduce the profits a trader makes; especially if they are performance-based.
What to Look For When Choosing a Crypto AI Trading Bot
Given how crypto AI trading bots are a fairly recent phenomenon, knowing how to choose the right one is crucial. Here are some key factors to consider:
Supported exchanges: Because each crypto exchange is different in terms of the fees they charge, and the variety of cryptocurrencies they offer, it is important to first identify whether an AI crypto bot integrates with your preferred exchanges. This could be the likes of Coinbase, Kraken or Binance; to name a few.
Diverse trading strategies: The next thing to look out for is whether your preferred bot offers different strategies. This could include grid trading (grid bot), dollar-cost averaging (DCA bot) or arbitrage; to name a few examples. So it is important to pick a trading bot that is in line with your trading objectives — whether it be long-term investments, or short-term gains.
Advanced AI capabilities: It is important to note that just because a crypto trading bot says it uses AI, this doesn't automatically mean it is using anything advanced or impressive. In other words, not all AI bots are created equal, and some will simply be using a basic API connection to GPT4, whilst others may have incorporated more advanced machine learning models. The best crypto trading bots will be the ones that use more advanced forms of AI.Backtesting and simulation tools: In order to not risk losing your money, the AI bot you opt for should ideally have backtesting features, which in layman terms is the ability to try out strategies using historical data without losing any real capital. This allows users to see how a bot might perform under various conditions.
Performance metrics: The main selling point of a quality crypto AI bot will be its ability to consistently bring about a good ROI for users. For this reason, you should primarily go for crypto AI trading bot providers who provide transparent performance stats. This can include historical performance, success rates, and transparency regarding risks. Those who are transparent with these stats are more likely to have better credibility.
Ease of use: Last but not least, you should ideally choose a bot that is intuitive and has great UX, as this can make a world of difference. Because trading bots are often complex to set up and use, using a product that has clear instructions and excellent user-experience can somewhat mitigate one's lack of trading or programming knowledge.
Which AI Tool is Best for Crypto Trading?
So the question everyone wants an answer to — what is the best AI crypto trading bot?
It is important to first be aware, that due to the nascency of these bots, the following list could change very easily in the future. Furthermore, no matter how hard one tries to be impartial, product reviews will always have slight biases due to preferences.
For this reason, the following 2 crypto AI bots have been chosen through a combination of the author's own analysis, combined with sentiment on social media:
1) Cryptohopper
Key Features:
AI learning and adaptability: Cryptohopper's AI trading bot continuously learns and adapts with live market conditions, making sure it picks the most optimal strategy at each moment. This is similar to how hedge funds enhance their trading, only this time, individual traders have all the power as Cryptohopper's AI bot does this for them.
Backtesting and paper trading: Cryptohopper's bot allows users to experiment with their strategies using historical data, which can protect against real losses when experimenting. This paper trading utility is one of Cryptohopper's biggest selling points.
Integration with multiple exchanges: Cryptohopper's AI bot works in conjunction with some of the world's leading exchanges, such as Binance, Kraken, and Coinbase. This allows users flexibility and access to different markets, and all through a single trading terminal.
Strategy marketplace: Cryptohopper users can use pre-built strategies by accessing their marketplace, which has various strategies that cater for different market conditions. This allows users to benefit from the expertise of experienced traders without having to invent the wheel themselves.
Trailing stop-loss and DCA: Cryptohopper's AI trading bot can be used alongside useful trading features such as trailing stop-loss (locking in profits and reducing losses), and Dollar-cost averaging (DCA) which averages out the cost of cryptocurrencies.
Drawbacks:
Steep learning curve: Despite having excellent UX, the advanced features found with these bots (such as configuring multiple strategies) can be a bit overwhelming for novices. The vast array of advanced features may require considerable time and practice for most new crypto traders.
Performance dependency on strategy quality: Although AI trading bots are superior to humans in many ways, their effectiveness still ultimately depends on the quality of the strategies that are being implemented. Strategies that have been poorly designed will result in poor results; no matter how good the AI is.
Potential for overfitting: Cryptohopper’s AI can overfit to historical data during backtesting, leading to less effective performance in live markets if the strategies are not regularly updated and retrained.
2) TradeGPT (Bybit)
Key Features:
One-click recommendations: TradeGPT provides personalised trading suggestions by analysing market sentiment and user token preferences; as well as other things. These are updated every two hours, meaning users have access to the most current data. Once a strategy is recommended, users can rapidly make a trade, or set up grid bots without needing to manually input parameters.
AI strategies and price predictions: TradeGPT uses machine learning to offer both long-term and short-term price predictions for various cryptos. These forecasts are backed by deep analysis of market trends, trading volumes, and sentiment indices. Additionally, the tool offers multiple trading strategies tailored to the user’s risk profile and market conditions, complete with details like direction, entry price, and rationale.
Technical indicator analysis: TradeGPT excels in analysing technical indicators such as RSI, MACD, KDJ, and Bollinger Bands for any trading pair. This enables traders to comprehend market movements more effectively, ensuring that decisions are based on a comprehensive understanding of technical trends.
Master trader & copy trading: With the Master Trader feature, TradeGPT combines AI-driven strategies with copy trading, allowing users to automatically follow the trades of successful traders. This feature eliminates the need for any programming skills, enabling traders to leverage sophisticated AI-powered strategies without complex setups. Unlike other platforms, there are no profit-sharing requirements, meaning users keep 100% of their gains.
Drawbacks:
Potential for over-reliance: Because TradeGPT is essentially ChatGPT, but for crypto trading, one potential drawback is that users can become too reliant on its AI strategies. As mentioned previously in the article, AI cannot gauge human sentiment or other external factors anywhere near as well as a human can.
Limited customisation for advanced traders: Although TradeGPT excels in providing already-made strategies, traders looking for more advanced customisation may find the lack of control limiting compared to other platforms.
Use of GPT 3.5: TradeGPT doesn't use its own proprietary AI, and relies upon OpenAI's GPT LLM. However, rather than using its more advanced models, TradeGPT uses the old GPT 3.5, which means its capabilities are not as powerful compared to bots which use more advanced models.
Are Crypto AI Trading Bots Ideal For Beginners?
Whilst crypto AI trading bots offer an array of different benefits (including automation, advanced data analysis, and faster trade execution), as can be seen above, some come with a steep learning curve. So for someone starting out, understanding and configuring advanced machine learning models can be overwhelming.
But even if the AI trading bot is more simplistic (as seen with TradeGPT), they are not foolproof, and still require careful monitoring; as well as a solid understanding of the crypto market and trading techniques.
For this reason, until crypto AI trading bots become even more autonomous and holistic in their abilities (especially when it comes to gauging human sentiment and external factors), it is recommended that crypto novices use crypto strategies instead.
Crypto strategies are more beginner friendly
For beginners, crypto portfolios (human-managed), often called crypto strategies, are a much better option for those wanting a hands-free investing option.
Unlike AI bots, these portfolios are managed by experienced traders and investors who are responsible for allocating capital to various cryptocurrencies, implementing risk management procedures, and ultimately executing the strategy on behalf of investors. Not only does this hands-on management offer better protection against volatility, but it can in fact be superior from a qualitative perspective, as experienced human traders/investors can gauge important human factors better than AI bots can currently do. Investors in these crypto strategies also don't need to understand technical indicators, as crypto strategy owners ultimately take care of this too.
If you are a European investor, ICONOMI is perhaps one of the best places to access professionally managed crypto strategies. The investing platform offers hundreds of carefully thought out strategies that users can invest in.
By allowing seasoned traders to guide investments, beginners can benefit from diversified strategies without the complexity of setting up and managing AI-driven tools.
Conclusion
The world of crypto trading will no doubt continue to evolve (and rapidly), and this means that AI-powered tools like trading bots will continue to become increasingly attractive to traders. However, it's 2024, and although these trading bots have an array of powerful and useful benefits, this article has demonstrated that they are also not without limitations.
For this reason, until AI crypto trading bots become more holistic in their abilities, and become more human-like, crypto novices may benefit more from ditching trading altogether, and adopting a more long-term approach to investing by allocating some funds to crypto strategies managed by experienced traders. These strategies offer a hands-free approach, providing professional oversight and mitigating the risks associated with self-managed AI bots. However, there is a trade off here, as although crypto strategy owners will do better at gauging human sentiment and external factors, they will always be at a disadvantage when it comes to quantitative analysis.
For this reason, the main piece of advice the author can give is to never invest/trade an amount you can afford to lose, and to continuously learn about investing and trading fundamentals; as well as keeping informed on the latest developments regarding AI and crypto trading/investing.
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