CFTC Warns Crypto Investors About Risks of AI Trading Bots
Summary:
The U.S. Commodities and Futures Trading Commission (CFTC) has issued a warning to cryptocurrency investors about the potential risks involved in using AI trading bots. With these platforms gaining popularity, the CFTC cautioned investors about the inability of AI to predict market outcomes and emphasized conducting a thorough background check of companies and traders before entrusting them with their investments. Despite past controversies linked to AI trading bots, major crypto exchanges are considering their use, with the belief that improvements in AI technology could influence market analysis and trading strategies.
Cryptocurrency investors seeking substantial profits have been cautioned against the temptation to depend upon automatic trading programs that use artificial intelligence (AI). The U.S. Commodities and Futures Trading Commission (CFTC) has clarified that future outcomes of the market cannot be predicted by AI, despite its emerging popularity. The CFTC issued a warning in their recent Customer Advisory cautioning the public about the potential scams involving AI, advising those seeking considerable crypto returns to be skeptical of overblown promises from AI such as high returns via trading bots, trade signal algorithms, and crypto-asset arbitrage algorithms.
The statement pointed out that "Social media platforms and influencers have made it alarmingly simple for con artists to disseminate false information". Melanie Devoe, head of the CFTC’s customer education and outreach department, urged investors to remain skeptical of the hype surrounding AI, noting its increasing use by bad actors to scam overzealous investors.
Importantly, the CFTC advised investors to conduct thorough background checks on companies and traders before entrusting them with money for AI-assisted trading activities.
Recently, there has been a growing dialogue around AI-driven crypto trading bots. In April 2023, several state regulators in the U.S. took action against a trading bot that reportedly promised daily returns of up to 2.2% through the use of AI. State securities regulators from Montana, Texas, and Alabama accused crypto platform YieldTrust.ai of running a Ponzi scheme, as there was no evidence to prove the existence or functionality of the AI trading bot as per its advertised abilities.
In June 2023, a peculiar case emerged where a crypto trading bot took a $200 million flash loan to rake in a nominal profit of just $3.24. This case was brought to light by blockchain analytics firm Arkham Intelligence.
Despite the risks, major crypto exchanges like Bitget are considering utilizing AI bots. Gracy Chen, CEO of Bitget, mentioned how the firm’s Commodities Trading Advisor (CTA) bot employs novel strategy logic by constantly receiving, analyzing and processing historical strategy data. The ultimate goal would be to create and choose trading strategies more intuitively, thus eliminating complex parameters.
Earlier this year, ChatGPT was asked about the likelihood of Bitcoin reaching $100,000 in value and the role AI could play. ChatGPT suggested that AI could influence market analysis, trading strategies, and advancements in blockchain technology.
Published At
1/28/2024 5:07:07 AM
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