AI’s impact on retail and institutional trading of crypto.
As artificial intelligence (AI) continues to advance, its influence on the crypto trading world becomes increasingly inevitable. In a recent discussion, Roundtable anchor Rob Nelson and Patrick Zielbauer, Managing Director of Sales at BlockFills, delved into the potential impacts of AI on both retail and institutional trading.
“Everyone’s talking about AI, and I love the AI conversations because I feel like we have no idea where this is going to take us,” Nelson said. He emphasized the inevitable impact AI will have on trading, but noted the uncertainty about whether retail or institutional traders will be more affected.
BlockFills’ Zielbauer agreed, stating that the impact of AI on trading is undeniable. He referenced events where asset managers were already being introduced to AI tools designed to enhance their trading experience. He also highlighted historical instances like the flash crash of 2010, caused by a spoofing algorithm. This incident underscored the potential volatility AI can introduce to the markets.
“Do I think we’re going to have this sort of dystopian future where these AIs are just hammering each other over the head, 24 hours, seven days a week? I don’t think we’re going to get there as quick as we think,” Zielbauer remarked. He envisioned a future where AIs might be developed to predict the behavior of other AIs, creating a complex trading environment.
Nelson noted that AI’s evolution could shift from predicting human behavior to predicting the actions of other AIs. He questioned whether these advancements would benefit the average trader. “In some way, there’s utility in this. I can tap into a knowledge base that helps me get around a lot of things that right now only institutional investors could know,” Nelson said.
Zielbauer responded by tempering expectations for retail traders, suggesting that while AI could offer useful tools, they would not be on par with those available to institutional traders. “I think one thing that could really be useful for the retail community as it relates to implementing AI technology is how to cut bad trades,” Zielbauer explained. He emphasized the need for algorithms that help retail traders manage risks and close losing positions.
Despite acknowledging the potential for AI to assist retail traders, Zielbauer maintained that institutional traders would always have superior resources and tools. He concluded by highlighting the importance of AI in risk management and decision-making, suggesting that even if retail traders don’t have access to the same advanced tools as institutional traders, they could still benefit from AI-driven insights.