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Cryptocurrencies Are Finally Mainstream Investments. Now How Can We Use Them?

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Long seen as the “bad boys” of the investment world – an asset that was unpredictable, wildly speculative, and a haven for corruption and other criminal elements – cryptocurrencies have evolved into a more stable investment. In fact,data shows that as 2024 begins, cryptocurrencies are less risky than some assets long considered “solid” and “stable.”

It's another sign – perhaps among the most significant – of the maturing of the cryptocurrency market. Other signs include the legal steps and prosecution against Sam Bankman Fried, Changpeng Zhao and others involved in crypto-related fraud, along with the SEC – after much foot-dragging – finally approving spot Bitcoin ETF trading. As I write this, the world's most ubiquitous cryptocurrency is set to become a feature in the portfolios of millions of new investors, who not long ago would have eschewed Bitcoin and cryptocurrencies in general as “too speculative.”

Volatility Hasn't Gone Away – But Its Effects May Be Controllable

Of course, “more stable” doesn't mean zero volatility. But it does mean that cryptocurrencies are more likely to rise and fall in value based on familiar criteria that affect other investments, such as Fed policy, inflation, employment figures, etc. – as opposed to the speculative increases and decreases because of a rumored investment in an obscure cryptocurrency by a major figure, for example. Cryptocurrencies are past that “cult of personality,” where influencers showing off a flashy lifestyle were among the chief market movers. The now-mature cryptocurrency market can now welcome mainstream investors who are looking to build long-term value in their portfolios.

And as cryptocurrencies become more mainstream investments, mainstream investment ideas and methods should be applied in order to get the most out of them. Investment methods that work for stock or currency markets, for example, could be used for cryptocurrency investments – with the expectation that those methods will produce results like those for other investments. Among the methods that have proven successful elsewhere – and are likely to prove successful for cryptocurrencies – are AI-based Quant Investment systems, which utilize advanced algorithms to provide guidance for investors, based on a huge number of factors.

How AI Can Help Cryptocurrency Investors

In fact, as the more mature crypto market sheds its signature random volatility, investors who want to make money will need AI tools more than ever. These AI systems can analyze events, expert opinions and analyses, trends and momentum, formulas (PEG ratios, VIX indices, etc.) and investment strategies, to name just a few – taking into account more data that any human could. Based on its findings, AI systems construct a model that, when applied to quant investment strategies, will find the right investments for clients by bolstering the algorithms used by the quant fund.

AI-based investing has helped investors in some of the most successful quant funds – and they can help cryptocurrency investors advance their investments as well. Algorithms designed for cryptocurrency quant investing take into account factors that directly affect those assets – such as the likelihood of regulatory changes to how banks or individuals can trade cryptocurrencies, or factors such as the scheduled April Bitcon halving, along with the “usual” factors that affect all investments.

AI is key to helping institutional investors navigate the new crypto market

AI can also help direct big-picture strategy when it comes to incorporating crypto into portfolios. Investors seeking high growth will likely be directed to some of the smaller, more volatile cryptocurrencies, where there is a greater likelihood of big value fluctuations. Investors seeking a quality, long-term investment are likely to be directed to Bitcoin spot ETFs and other investment vehicles.

In cases where large amounts of money are involved, advanced and advancing AI technology and quant-based trading is also important, as it can detect tiny and subtle market movements that can, when large sums are involved, translate into significant gains or losses. This is especially vital as crypto trading moves beyond taking advantage of simple arbitrage or other obvious movements and factors that have until now been behind many of the profits. At the same time, as AI is used more for investing, data scientists and investors will both gain more insights into not only which parameters are most important to include in models, but the weight that each should be given.

Participating in the new mature era of crypto

AI-based quant investment systems are just one high-potential way investors can take advantage of a mature cryptocurrency market; as investment houses market their Bitcoin ETFs, expect an entire army of consultants, advisors, and experts to provide advice or assistance on the best way to make money off this asset. Staid and mainstream investment services have quickly changed their tune on cryptocurrency investments; formerly against the idea altogether, these investment services now offer Bitcoin ETFs as an investment option. As time goes on, Bitcoin ETFs – and other investment vehicles based on cryptocurrencies – are likely to become common features in investment portfolios of investors small and large, as common as high-growth mutual funds or municipal bonds.

Mainstreaming crypto necessitates new investment strategies

Investments wax and wane in their popularity; sometimes gold is the “in” investment, other times it’s blue chip stocks, mortgage bonds, T-bills, and others. An investment’s popularity is usually tied to events influencing it; high interest rates are often tied to T-bill investments, low rates often pump up real estate values, and so on. Given the circumstances surrounding cryptocurrencies in 2024 – their stability, acceptance by regulators, the potential upside – it appears that cryptocurrencies could very well be 2024’s “in” investment.

And with that new-found acceptance, it’s worthwhile investigating more mature approaches to capturing the opportunities. Using advanced AI and digital analysis is just one way institutions are unlocking the alpha.

Dr. Anna Becker is the CEO and Co-founder of EndoTech.io, where she leads the AI/ML teams developing solutions for AI-driven financial trading and investing. Anna's deep-learning algorithms have managed nearly a billion dollars of investment (AuM) and have been deployed in managing institutional monies for more than a decade. Anna received a PhD in AI from the Technion Institute of Technology in Israel, and has founded and sold several AI companies in the FinTech space, including Strategy Runner.