AI: The Overrated Sidekick in the Rollercoaster of Markets!

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Markets

What to Know:

  • In a recent survey of trading firms, Nickel Digital Asset Management found that nearly every executive claimed AI is already playing a “vital” role in core investment decisions. How delightful!
  • However, let’s not kid ourselves; there are moments when the cold, lifeless algorithms fall flat, and a good old human touch is required. Shocking, isn’t it?
  • Despite the crypto market taking a nosedive, London-based Nickel-master of the multi-manager platform allocating to over 80 teams-remains as optimistic as ever. Perhaps they’ve been sipping from the fountain of eternal hope.

When the markets plunge like an overripe fruit, as they did at the end of January, investment firms need all hands on deck to navigate the storm-preferably with a cocktail in hand. Unsurprisingly, many are turning to AI, the sparkly new toy, to diagnose losses and even suggest ways to turn lemons into lemonade.

A whopping 96% of executives from a group of trading firms managing around $14 trillion in assets declared that AI is their new best friend in core investment processes, according to Nickel Digital Asset Management’s latest research. But hold your applause, dear audience; a human hand is still required, says none other than Anatoly Crachilov, CEO extraordinaire.

AI is revolutionizing quantitative trading, much like it is with every other industry that dares to embrace change. Beyond the large language models (LLMs) that have invaded our lives, we also have machine learning and predictive AI that scour historical data for patterns. Charming, isn’t it? But alas, they struggle to sniff out erroneous information that could lead to catastrophic blunders. Ah, the joys of technology!

“It’s a very tough market. AI will not save you; it’s not a savior,” Crachilov quipped in an interview. Who knew he had a flair for the dramatic?

Even with the crypto market’s recent tantrum, Nickel, the London-based whiz kids, remains unflinchingly positive for the year. “Perhaps an achievement in its own right,” Crachilov mused. A true optimist, indeed!

The crossover between crypto trading and AI is reaching dizzying heights in risk management. While AI may struggle against high-speed sniper bots targeting those elusive low-liquidity crypto tokens, there’s a sweet spot where sentiment analysis meets data-driven models to manage risk. A match made in financial heaven, wouldn’t you agree?

Each manager affiliated with Nickel operates within a finely-tuned risk framework, complete with maximum drawdown limits for those particularly volatile moments. Sometimes, however, human intervention becomes essential, as Crachilov elaborated-old-school methods can still save the day amidst all this automation nonsense.

“If the market goes into distress, like a bad soap opera, you sometimes have to exercise discipline and stop managers who breach [max drawdown] limits, whether it’s AI driving their strategy or not,” he stated with the gravitas of a theatre actor. “Ultimately, there’s a hard stop on how much pain we would allow in the portfolio.”

As for how much human involvement is necessary in AI-driven trading strategies, Crachilov confessed that the nuances were too intricate for Nickel’s relatively straightforward survey of managers. Ah, the plot thickens!

Nickel runs “a military-style operation,” collecting over 100 million data points every 24 hours, which would make any general proud. “While this part is splendidly informed, it still requires human involvement. And yes, we do converse with managers even in the middle of the night,” Crachilov added, sounding ever so slightly like a sleep-deprived genius.

As they evolve toward full automation, they must consider the potential pitfalls of erroneous or incomplete data feeds from those notoriously capricious crypto exchanges. For example, a human would likely deduce that data showing a certain position down 100% is probably a sign of something amiss. But an AI system? It might just blithely enforce a limit when it’s utterly unnecessary. Classic!

“You need a human overlay. The whole crypto ecosystem is still very fragile,” Crachilov warned. “Some exchanges may go on timeout for 15 minutes-like a toddler throwing a tantrum-or produce patches of bad data, inadvertently forcing the system to shut down managers for no good reason.” Such drama!

Ultimately, it boils down to the firm’s risk-management philosophy, which aims to eliminate single points of failure throughout the process, as Charles Adams, Nickel’s head of investor relations, eloquently put it.

“If there was one autonomous agent monitoring the entire portfolio and things took a turn for the worse, the risks could be devastating,” he said. “The goal is to maintain a well-diversified fund spread across over 80 managers today, minimizing the risk of any single point of failure. We must keep the show running smoothly!”

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2026-02-10 12:31