In 2023, Crypto.com introduced Amy, an AI tool based on OpenAI‘s ChatGPT, to its exchange to improve user experiences on the platform by providing quick responses from customer support.
Bitget, a derivatives exchange, introduced an AI feature for grid trading strategies to facilitate transaction automation. It also pledged $10 million to the Fetch.ai ecosystem, highlighting its belief in the continuous growth of AI technologies.
AI use in crypto trading is in full swing as exchanges integrate it into numerous areas to enhance their platform’s usability.
In this post, we dive into the ways crypto exchanges are leveraging AI algorithms to improve their fraud detection, customer service, internal operations, and more.
Like any other type of business, crypto exchanges rely on proper internal management. Startups and experienced companies alike must prioritize financial planning and efficient administration not only during cryptocurrency exchange development but also throughout the exchange’s life cycle.
The truth is, it can be challenging for trading platforms to keep everything on track. But it’s necessary, since inefficiencies can cause operational disruptions and increase costs. That’s why exchanges are investing in artificial intelligence tools that can help with financial planning and management by forecasting future expenses.
Typically, AI-driven predictive tools analyze historical business spending to predict future financial trends, allowing exchanges to allocate resources effectively. They also help with financial management by automating various accounting tasks and minimizing the risk of human error.
On the administrative side, exchanges use AI tools to automate repetitive administrative tasks, like answering customer inquiries. This minimizes the need for manual intervention, streamlines operations, and allows staff to focus on high-value tasks.
Some exchanges also leverage AI in human resources and workforce management. AI can help screen resumes and assess candidates’ suitability for specific roles when hiring, saving HR teams a lot of time.
The technology also helps with employee scheduling by evaluating business demands and employee availability. Performance reviews are another opportunity to leverage AI, as managers can use it to assess and summarize feedback from performance reports, customer feedback, and more.
Crypto exchanges don’t typically close, as the crypto market is operational 24/7. However, most crypto traders have full-time jobs and other responsibilities that limit their trading time. Since trading fees are one of the main ways exchanges make money, they have an incentive to provide traders with hands-off trading opportunities.
That’s where machine learning and algorithmic trading come into play. Crypto exchanges provide bots or applications that leverage AI to assess market data, find trading opportunities, and execute trades on behalf of their users.
Unlike human traders, AI-powered tools can operate tirelessly around the clock, promoting high-frequency trading.
Beyond trading 24/7, AI also helps maximize user profits. The crypto market is fast-paced, with trading opportunities emerging and disappearing in seconds or minutes. AI tools can capture opportunities as soon as they arise, preventing users from missing out on trades.
These tools also minimize traders’ risk by eliminating emotion from trading. Unlike humans, AI tools are not susceptible to impulse trading, even when the market is particularly volatile. Instead, they stick to pre-programmed strategies, which are often safer than trades led by greed, fear, or other human emotions.
Unfortunately, the lucrative nature of the crypto space isn’t always a good thing. Losses resulting from crime in the crypto market rose by 79% from 2020 to 2021 (primarily due to an increasing number of scams), hitting a record $14 billion.
Some exchanges have turned to AI to reduce theft and fraud. AI algorithms have data analysis and pattern recognition capabilities that allow them to detect trade anomalies, facilitating swift action.
They assess large volumes of transactions, looking for abrupt changes in trading frequencies, unusual transaction sizes, and links to suspicious addresses. This helps exchanges protect their users and identify potential fraud cases before they cause devastating losses.
AI technology helps with risk management, as well, by conducting real-time market analyses to identify anomalies that may pose security threats for traders. It can also provide risk mitigation strategies, allowing exchanges to maintain secure platforms.
Additionally, AI-driven risk management tools promote regulatory compliance, minimizing the risk of fines. For example, they can assess user transactions to ensure they comply with anti-money laundering (AML) regulations. They can also automate the KYC (Know Your Customer) process, ensuring your exchange is on the right side of the law.
No trader is perfect at analyzing the market and making predictions. This is quite understandable, as analysis is a lengthy process that requires you to assess all factors that can impact crypto prices.
Crypto exchanges use AI to ensure better asset management. The technology can analyze historical data, like past asset prices and market trends, and provide actionable insights into possible short and long-term price movements.
AI tools also assess news stories and social media conversations for insights into market sentiment regarding specific currencies. This data is valuable for users, as it enables well-informed decision-making, reducing the risk of losses or missing out on lucrative trades. It’s a win-win for both traders and crypto platforms.
Crypto exchanges have experienced tremendous growth over the past few years as more people learn about and get involved in cryptocurrency trading. Unfortunately, this has resulted in a higher burden for customer support teams.
Customers still expect exceptional services, especially now, in the age of endless choices. Yet research shows that crypto customer service is severely lacking — 40% of large crypto companies only send out automated responses or don’t respond to customer emails at all.
This means crypto exchanges have to get creative with their customer support efforts to meet their clients’ needs, and AI technology is at the heart of their initiatives.
Many use automated response systems and chatbots to answer customer queries. These tools can handle more queries than human beings and provide faster resolutions.
We know what you’re thinking — they can’t offer the same level of customer support as people would. While this may be true, they come very close — so close, in fact, that some people may not realize they’re chatting with a bot.
This is because crypto exchanges typically use conversational AI for customer support. It leverages both machine learning and natural language processing (NLP), allowing it to understand, process, and respond to customer needs pretty much the same way a human would.
Along with better customer support, modern users expect personalized experiences from their crypto exchanges. However, if you rely solely on your workforce to offer these experiences, you’ll take them away from other vital tasks and run up a hefty payroll bill.
This is why crypto exchanges integrate AI robo-advisors into their systems. These AI-driven financial advisors can assess user behavior, trading strategies, and transaction histories and offer personalized trading recommendations based on their findings. This saves users time and can boost engagement, trading frequency, and platform loyalty.
Trading platforms also use AI to customize user dashboards. The technology analyzes individual traders’ behavior and displays their preferred widgets, statistics, and layouts on their dashboards.
This makes the platforms more user-friendly and ensures traders get quick access to relevant information when trading, improving the customer experience.
Whether you build a custom crypto exchange or invest in white-label software, you must monitor your exchange regularly to detect potential security threats early and ensure compliance.
While you can rely solely on your IT team, many exchanges choose to integrate AI into their platforms. Human input is necessary, but people can make mistakes and miss some anomalies, impacting platform operations. AI, on the other hand, improves efficiency and thoroughness, ensuring nothing slips through the cracks.
AI is also excellent at technical analysis, so exchanges often use it to monitor the health and performance of their transaction infrastructures in real time. It can identify potential system anomalies before they affect user experiences and offer preventive maintenance recommendations to maximize security.
Additionally, AI algorithms help with load balancing. They can monitor system performance metrics like network traffic and transaction volume in real time and route requests to available servers, facilitating continuous trading.
AI technology is gradually integrating into crypto exchange operations to aid in streamlining internal processes that benefit the overall user experience. AI enables exchange users to make better trading decisions, improves customer support capabilities, facilitates a more personalized user experience, and more.
On the consumer side, AI trading boosts transaction frequency and minimizes the risk of losses by trading pragmatically using pre-programmed algo strategies that eliminate or correct for human biases.
Inline with industry wide expectations, AlphaPoint is identifying areas for AI integration in its digital asset exchange products to optimize the overall experience for operators and end users alike. When you license AlphaPoint’s white label solutions, you get a platform with high-growth potential that’s adaptive to the latest innovations in automation, and primed for implementation of AI to achieve greater efficiency, security, and user satisfaction.
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