In readiness for the upcoming bull market, investors are exploring ways to maximize their returns on crypto investments. With the development of artificial intelligence, investors believe that using AI-inspired trading bots will enable them to take advantage of the upcoming bull market.
Compared to traditional trading approaches, AI-oriented trading bots automate buying and selling digital assets to provide traders with fast and efficient trading. Recently, AI trading bots have gained popularity since they allow traders to diversify their trading.
Risks Associated with AI Trading Bots
The ongoing AI craze in crypto trading attracted the attention of global regulators to safeguard customers from manipulative business practices. In an official publication, the US Commodities and Futures Trading Commission (CFTC) warned crypto enthusiasts about using AI trading bots.
The CFTC official argued that this software cannot predict the future despite the benefits offered by AI trading bots. The CFTC report titled “Customer Advisory Cautions: The Public to Beware of Artificial Intelligence Scams” outlined the inherent risk of AI trading bots.
In the report, the regulators underlined that despite the promises associated with AI software, investors should avoid these bots. After careful consideration, the CFTC officials noted that the AI trading bots promised the investors high investment returns.
Based on the volatile nature of digital assets, the official advised the traders to avoid using AI-powered bots. The CFTC report noted that AI trading bots were modified to meet specific purposes.
This implies that AI trading bots were of different categories: AI-assistive devices, trade signal algorithms and digital assets arbitrage algorithms. The regulators noted that AI firms invested heavily in marketing their products to reach a sustainable audience.
Features of AI Trading Bot
The CFTC team observed that AI promotions have dominated social media. A review of the multiple advertisements on social media demonstrated that some influencers used false information to entice customers to buy their products.
In an earlier report, the director of customer education and outreach at CFTC, Melanie Devoe, advised the investors to be hyper-vigilant when investing in the most hyped projects.
The executive noted that the popularity of AI projects captivated the interest of criminals seeking to exploit innocent investors. Devoe regretted that the ongoing hype on the AI project has made it difficult to distinguish a genuine product from a fake one.
In her statement, the executive outlines strategies to avoid falling into the fraudster’s trap. She urged the investors to conduct background checks before making any investment. This will involve extensively researching the company’s background information, business practices and assessing compliance levels.
The CFTC official confessed that in 2023, the AI-oriented trading bot became the centre of discussion among investors and regulators. However, the hopes of the AI trading bots’ early investors were shuttered due to the uncertainties in the crypto industry.
Customers Suffer Losses After Using AI Trading Bots
Some affected investors regretted the failure to generate high returns even after investing in AI trading bots. The complaint lodged by the investors compelled the US regulatory agencies to react and restore the integrity of the financial industry.
The securities regulators from Alabama, Montana and Texas joined forces to investigate fraudulent schemes promising the investors high returns. After a thorough investigation, the regulators noted that the operation of YieldTrust.ai mirrors a Ponzi scheme.
The regulators claimed the YieldTrust.ai trading bot was non-existent. In June, the regulators noted that some influencers misled investors about the features of the AI trading bots.
They noted that the YieldTrust.ai trading bot could not perform some tasks. The AI craze compelled high-profile crypto exchanges, including Bitget, to assess the use of AI bots on its platform.
In an interview with the chief executive of Bitget, Gracy Chen explained that the AI bots depend on historical data. The official argued that the AI trading bots receive, analyze and process historical data before proceeding with initail trading.
Also, the AI bots leverage the power of self-learning to make trading more efficient. In her analysis, the executive noted that the AI bots offer the traders the most suitable trading strategies without completing the algorithms. Chen added that the AI trading bots only require a computed rate of return and price chart to execute certain tasks.