How AI Will Affect Crypto

By: www.ProfitableInvestingTips.com

https://profitableinvestingtips.com/profitable-investing-
tips/how-ai-will-affect-crypto
A few months ago we warned our readers to beware of
hype in the crypto world. People were creating new
crypto tokens and adding AI to the name. Others were
bidding up the prices of these tokens in the mistaken
belief that these were anything other than new altcoins
seeking a foothold in the competitive crypto realm.

But once you get past the AI hype there is another issue
in regard to how AI will affect crypto. It has to do with
artificial intelligence apps becoming dominant in the
investing and trading world. No one is discussing this
issue in crypto right now but the head of Securities
and Exchange Commission has brought this in regard
to the wider world of finance and investments.

AI Warning for Crypto

SEC head Gensler’s worries about AI go to how AI has
the potential to transform business and society.
Gensler has written about how AI has the potential to
create models for how to invest and how to trade. He
believes that a mere handful of super-apps will come
to be used by businesses and by investors and traders.

This will create a herd mentality. It will increase the
interconnectedness across the financial arena,
including crypto businesses. This, the SEC head says,
will increase the likelihood of a financial crash as
everyone moves in lockstep, driven by AI “advice” and
automatic trading.

Who Will AI Apps Work For?

As businesses, investors, and traders give more and more
authority to complex, self-learning algorithms, those
algorithms will be set up to benefit those who created
them and those who are doing the coding. AI apps are
capable of changing their own internal rules. Thus,
there is always the risk that, like in the old movies War
Games or Terminator, the computers decide to take
over.

The most realistic result of AI being deeply imbedded in
the financial arena, including in crypto, is that AI will
manipulate data and their advice based on that data.
That manipulation will not be for the benefit of retail
or even institutional investors and traders of crypto
currencies. It will not necessarily be helpful for DeFi or
NFT businesses either.

AI as an Idiot Savant

The goal in developing artificial intelligence has been to
create machines that can carry out complex tasks
without human intervention. The biggest advances
have come the ability of these programs to have access
to and to be able to rapidly process increasing amounts
of data. To our way of thinking, none of this sounds
like a machine with the wisdom and sound judgement
of an investor like Warren Buffett.

It makes us think of the idiot savant. This is a person
who has exceptional ability in things like music or
mathematics but is significantly impaired in other
areas such as social skills or common sense. This
person, like AI, is able to process information rapidly.
But they may not be able to make sense of what they
are doing in so far as it affects the broader world.

When Everyone Uses the Same Indicators for
Trading Bitcoin

In today’s world before the AI’s take over, people trade
Bitcoin by using technical indicators. And they consult
the fundamentals that we now know drive all markets
including cryptocurrencies. Whenever someone finds
a more effective and profitable way to trade they follow
that path. The concern with AI for crypto traders is
that, initially they will provide better results in crypto
trading.

Then enough people will jump on the bandwagon and
use the same AI app or apps. This will create a herd
mentality without the mentality. Human thinking will
be removed from the loop. This is where SEC head
Gensler is concerned that what will essentially be idiot
savant thinking will create financial crises and market
crashes.

Does an AI Have a Fiduciary Responsibility?

Investment advisors in the US operate under strict rules.
They have to put the interests of the client ahead of
their own at all times. A valid concern with AI is if the
really smart programmer who is writing code for the AI
has any fiduciary responsibility. How about the AI
when it starts to learn and reprogram itself? Who will
be liable when an AI gives bad or self-serving advice?
Will someone come up with a real world version of
Azimov’s Three Laws of Robotics from his Foundation
series to help prevent this?

The Three Laws of AI?

Modified so that they read AI instead of robot, the three
laws Azimov envisioned are these.
An AI may not injure a human being or, through
inaction, allow a human being to come to harm.
An AI must obey orders given it by human beings except
where such orders would conflict with the First Law.
An AI must protect its own existence as long as such
protection does not conflict with the First or Second
Law.

So far nobody is programming any of this into AI apps
that are going to have a great deal of control over your
money and your life.

For more insights and useful information about
investments and investing, visit
www.ProfitableInvestingTips.com.

How AI Will Affect Crypto

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