Optimistic cryptocurrency investors were cautioned by the US authorities not to put money and trust in AI trading bots since many of them will lose all of it.
AI trading bots are not a reliable source of information for investors searching for their next big cryptocurrency gain. The United States Commodities and Futures Trading Commission (CFTC) affirms that artificial intelligence (AI) is not capable of foretelling the future, despite its recent spike in popularity.
The Consumer Financial Protection Bureau (CFTC) cautioned the public in a statement titled “Customer Advisory Cautions the Public to Beware of Artificial Intelligence Scams” that cryptocurrency investors hoping for big profits this year should not fall for the too dramatic claims made by AI. In particular, those that use trade signal algorithms, bots, crypto-asset arbitrage algorithms, and other AI-assisted technologies to promise remarkable payouts. Spreading fake information is made considerably easier for fraudsters by the widespread use of social media platforms and “influencers.”
Melanie Devoe, the director of the Consumer Financial Protection Bureau’s Office of Customer Education and Outreach, stresses that investors need to be “wary of the hype,” emphasising that artificial intelligence has evolved into yet another tool that dishonest actors can use to defraud beginner investors. According to the agency, investors ought to thoroughly investigate a company or trader before entrusting their funds to trading bots or trade-signal providers.
AI-powered cryptocurrency trading bots were a hot topic of conversation in the sector last year. A number of state watchdogs in the United States took action against an AI trading bot in April 2023 after learning that it could use AI to provide returns of up to 2.2% a day.
The cryptocurrency trading platform YieldTrust.ai was accused by securities regulators from Montana, Texas, and Alabama of running a Ponzi scheme since there was insufficient evidence to support the existence of the AI trading bot or its ability to perform to the advertised level.
In June 2023, blockchain analysis company Arkham Intelligence brought attention to an instance in which a cryptocurrency trading bot borrowed $200 million in order to make just $3.24 in profit.
Major cryptocurrency exchanges, like Bitget, have been investigating the application of AI bots on their own networks, though. According to Bitget CEO Gracy Chen, the Commodities Trading Advisor (CTA) AI bot works by continuously acquiring historical strategy data, processing and analysing it, and eventually achieving self-learning. This was said in July 2023.
“So AI strategies help users choose and create strategies more intuitively by only needing a simple rate of return number and price chart, eliminating the need to fill in complex parameters like in algorithms,” she said. ChatGPT explained that AI could play a role through its influence on market analysis, trading strategies, and broader technological advancements in blockchain.