Regulatory Body CFTC Advises Against Relying on AI for Crypto Trading Success

JJohn January 28, 2024 7:01 AM

Contrary to popular belief, artificial intelligence (AI) cannot guarantee your next cryptocurrency win, warns the United States Commodities and Futures Trading Commission (CFTC). Investors are cautioned against falling for exaggerated promises made by AI, as it becomes a tool for fraudsters to exploit novice investors.

AI doesn't guarantee crypto trading success

The United States Commodities and Futures Trading Commission (CFTC) has cautioned investors about the risks of relying on artificial intelligence (AI) for cryptocurrency trading. Despite AI's growing popularity in the trading world, the regulatory body insists that such technology can't foresee future market trends or guarantee financial gains. This warning comes in response to the surge in AI-assisted trading bots promising significant returns. Such promises, according to the CFTC, are often exaggerated and misleading.

Beware of the AI hype and scams

The CFTC also urges investors to be vigilant against falling for scams involving AI. With the rise of social media platforms and influencers, it has become easier for scam artists to disseminate false information and take advantage of novice investors. Melanie Devoe, director of CFTC's office of customer education and outreach, underscores the importance of being cautious about AI-enhanced trading hype. It's crucial for investors to thoroughly research a company or trader before trusting them with their money.

AI-driven crypto trading scams on the rise

In 2023, many AI-driven crypto trading scams came to light. For example, U.S. state watchdogs took action against YieldTrust.ai, a crypto trading platform alleged to be running a Ponzi scheme. The company claimed its AI trading bot could generate lofty returns of up to 2.2% a day, but failed to provide any evidence of the bot's existence or its performance capabilities. In another instance, a crypto trading bot took a $200 million flash loan, securing a negligible profit of just $3.24.

Despite the warning from the CFTC and the reported scams, major crypto exchanges like Bitget are still exploring the use of AI bots. Bitget CEO Gracy Chen revealed that their Commodities Trading Advisor (CTA) AI bot operates by continuously receiving, analyzing, and processing historical strategy data, thereby enabling self-learning and better decision-making. The bot simplifies the trading process, eliminating the need for complex parameters in algorithms, and making trading more accessible.

AI has the potential to significantly influence market analysis and trading strategies, according to ChatGPT, a conversational AI developed by OpenAI. When asked if AI could aid Bitcoin's price to hit $100,000 this year, ChatGPT highlighted that AI could contribute through its ability to analyze the market, develop trading strategies, and advance blockchain technology. However, the exact impact and role of AI in cryptocurrency trading remain somewhat ambiguous and highly debated.

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