The cryptocurrency space is still nascent but evolving at a breakneck pace. While the original Bitcoin whitepaper laid the groundwork for decentralized digital currency over a decade ago, we’ve only begun to scratch the surface of blockchain technology’s potential applications.
One area that is ripe for disruption is asset management and trading. Crypto asset management shares some similarities with traditional finance, but there are also key differences that create opportunities for new approaches leveraging automation and artificial intelligence.
High-Frequency Crypto Trading Bots
In the world of crypto trading, algorithms and bots have rapidly been on the rise to execute strategies, analyze markets, and manage portfolios 24/7 without human intervention.
In traditional finance, high-frequency trading (HFT) firms use ultra-fast bots to exploit small pricing inefficiencies across different exchanges and assets. Similarly, crypto trading bots can monitor different decentralized exchanges (DEXs) and centralized exchanges to capitalize on temporary arbitrage opportunities based on on-chain data from the decentralized networks.
Automated Portfolio Rebalancing
One advantage of crypto compared to traditional assets is the ability to execute trades 24/7 with almost instant settlement times. Automated rebalancing bots can continuously monitor a crypto portfolio and execute trades to maintain a certain desired asset allocation without any human input required.
Robo Advisors and DeFi Automation
Robo advisors have gained popularity to provide automated portfolio management for traditional assets based on a client’s risk tolerance. In DeFi, we are seeing similar “robo” concepts emerging to automate yield strategies across different decentralized lending platforms, liquidity protocols, staking opportunities and more.
Some players are even working on AI bots that can execute an entire investment strategy autonomously across various DeFi platforms to maximize returns while managing risk automatically. This could make DeFi wealth management more accessible to mainstream users over time.
Smart Contract and DApp Monitoring
Beyond trading and investing use cases, bots and automation also play a role in monitoring, analyzing, and interacting with smart contracts and decentralized applications (DApps). AI services can continuously scan blockchains, smart contracts, and DApp activity to detect irregularities, security vulnerabilities, bad actors and more.
Analytics bots provide visibility into DApp metrics like user activity, total value locked, transaction flows and more. Other automation tools help simplify the process of interacting with DApps by bundling multiple transactions, automating approvals and enabling advanced execution strategies.
