The artificial intelligence (AI) war is on. The rise in popularity among AI image generators like Jasper and DeepAI last year were just the early stages of the much larger boom happening right now. Tools like OpenAI’s ChatGPT have taken the world by storm, for better or for worse. Now, anybody can go to the ChatGPT website (when it’s not at capacity) and ask it any question they want. I decided to ask it which cryptos to buy.
There’s a lot that goes into AI algorithms and programming, so much so that it soars over the head of the layman. It’s these seemingly-unending layers of engineering that allow us to prompt the tool to fix our code, write us stories or explain complex subjects to us. In making investment decisions, the tool works no differently.
I recently logged onto ChatGPT and asked it to recommend me 10 cryptos to buy based on growth potential. This is the list it gave me:
- Ethereum (ETH-USD)
- Solana (SOL-USD)
- Polkadot (DOT-USD)
- Avalanche (AVAX-USD)
- Cosmos (ATOM-USD)
- Chainlink (LINK-USD)
- Algorand (ALGO-USD)
- Polygon (MATIC-USD)
- Terra (LUNA-USD)
- Binance Coin (BNB-USD)
ChatGPT Explains Its “Cryptos to Buy” Methodology
ChatGPT’s recommended list of cryptos to buy is pretty interesting. I asked it to explain its methodology a bit, and was surprised to find that the tool utilizes both qualitative and quantitative data in weighing its opinions.
Unsurprisingly, the first thing ChatGPT used to make its recommendation was quantitative chart analysis — a favorite methodology used by crypto die-hards far and wide:
“I selected the top 10 cryptocurrencies with the highest market capitalizations, which are generally considered to be the most established and widely adopted cryptocurrencies in the market. From there, I considered their historical performance, looking at factors such as price trends, trading volume and market share to identify which cryptocurrencies have demonstrated strong growth potential over time.”
What was more interesting was ChatGPT’s use of qualitative data in weighing its picks. The AI says it analyzes each products’ “underlying technology, use cases, adoption and regulatory environment” in making its selections.
ChatGPT Defends Its Picks for Cryptos to Buy
This holistic approach to crypto analysis ensures the AI makes recommendations based less on price momentum and more on strong fundamentals. However, seeing some interesting inclusions (and one very noticeable exclusion), I felt the need to press it more.
Why Terra? The project has seen complete and utter failure at the hands of poor management in the last year, and its founder has been on the run from the law ever since the original project imploded and bankrupted several companies. ChatGPT admits it could be a lack of information which prompted the pick; indeed, if the tool had data on the project since its mid-May collapse, it would likely have better judgement than to pick a project many consider flawed and unwanted by the community at-large.
And, of course, why is there no Bitcoin (BTC-USD)? It’s the largest of cryptos, easily the most recognizable and the one which prompted the crypto movement in the first place. It appears that from both quantitative and qualitative standpoints, ChatGPT remains skeptical of Bitcoin’s future:
“While [Bitcoin] may continue to grow over time, it may not experience the same level of growth as some of the newer cryptocurrencies that are still in the early stages of development. Additionally, Bitcoin’s use case is primarily as a store of value and a digital currency, whereas some of the other cryptocurrencies that I recommended have more specific use cases and potential for growth in specific industries or markets.”
Who Does ChatGPT Expect to Win the Layer-1 Race?
As for the rest of the list of cryptos to buy, investors might be impressed by ChatGPT’s crypto picking abilities. Lots of the other cryptos recommended are wildly popular projects, and they all have great potential for growth. One thing to note is that seven of the ten are primarily layer-1 dapp networks. Binance hosts a BNB Chain alongside its exchange platform, making for a total of eight.
With this in mind, I was interested in hearing ChatGPT’s take on the battle between layer-1 networks to compete with and potentially overtake Ethereum. It positions Solana, Polkadot and Avalanche as three of the most likely projects to surpass Ethereum in the coming years.
Solana, it says, has an edge due to its low cost and high scalability, but notes a downside in its “proof of history” consensus mechanism being nascent and untested as opposed to proof of stake. Meanwhile, the AI praises Polkadot’s interoperability, but acknowledges the project’s governance structure “could lead to potential centralization issues in the future.”
Regarding Avalanche, the program speaks highly of its own unique consensus. But, it acknowledges the drawback that like Solana, it is unproven, and like Polkadot, it could lead to higher centralization.
In all, the AI provides some very nuanced takes on each project. I am quite impressed by the depth at which ChatGPT analyzes these investments, and many other investors likely feel the same. However, the drawbacks are quite clear, as it seems to lack the most up-to-date information on each project. In a market where news moves exceptionally fast and projects can soar or tank in minutes, this is a major fault line in the tool.
For this, the AI is very careful to respond to each question with the ever-popular crypto catchphrase of “do your own research.” For example, it stated, “Conduct your own research and consider all available information, including any potential risks and challenges, before making any investment decisions.” When pressed on whether or not asking the tool these question was doing my own research, it pointed me to speak with investing professionals before buying any of its recommendations.
What Does ChatGPT See for the Future of Crypto?
Obviously, ChatGPT has a robust set of data on the cryptocurrency world. And, it can pick from this pool of data to give some insightful opinions on individual projects. Before logging off to free up capacity for other curious users, I had to hear the AI’s predictions for the future of crypto.
The model assumes a fairly positive outlook for the crypto market in 2023. It predicts an overall-bullish trajectory for the industry, primarily due to increasing adoption of crypto and blockchain technology by institutions. “We have seen more and more companies and financial institutions embrace cryptocurrencies as a legitimate asset class, and this trend is expected to continue.” It also gives credit to the increasing functionality of new projects as reason to believe more investors will enter into the space.
Moreover, the model has a more optimistic take on regulations than many may care to admit. Indeed, while the Securities & Exchange Commission, the U.S. Department of the Treasury, the European Union and countless others crack down on projects, the AI argues this is good news. It says these regulators are “providing greater clarity and legitimacy to the market, which could in turn drive increased adoption.” This, it contends, would then put pressure on regulators to provide clearer guidance to facilitate the entry of more projects onto the market.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.