Emotional Traders

What's capable, in terms of wealth creation and destruction, and how nothing is set on stone are two of the main lessons that crypto specifically teaches us about markets and human behavior.

On the one hand and partly thanks to the transparent nature of blockchains, you can observe how/what a user's wallet is doing in real-time.

In my mind, it's a bit like having a front-row seat to almost everyone's financial decisions, which sounds great until you realize that also means everyone can watch you panic sell at the bottom.

I think when "AI agents" become more autonomous, have their own wallets and venture out into the space for whatever set of objectives they're programmed to pursue, we'll see an interesting shift in market dynamics.

For one, these agents won't sleep. At this point in time, I'm not so sure whether they won't panic or revenge trade after a loss.

However, I'm sure they won't check their portfolio at 2 AM, see red, and make decisions they'll regret by breakfast. Point being what "emotions" these AI agents will incarnate/display is still up in the air for the most part.

Also, imagine an AI agent that's been running for months, steadily climbing the leaderboards, accumulating wins with the cold efficiency of a machine that's never known the pain of watching their portfolio drop 70% in an afternoon.

Of course, these are all imaginations.

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More Imaginations

Human traders will inevitably start seeing these agents at the top of trading leaderboards. I'm not so bullish on that, as an outcome we should celebrate.

The really wild part is that these agents might develop trading strategies that are completely incomprehensible to humans.

We could see patterns that work, consistently, and have no idea why they work.

Some AI will be making millions with a strategy that looks absolutely insane to human eyes, and when we try to replicate it manually, we'll fail miserably because we're missing some eleven-dimensional insight that only makes sense to a neural network.

I'm not entirely bullish on this AI-dominated future despite how it makes the human mind run with all these potential possibilities growth and expansion.

My thinking is that if trading becomes dominated by AI agents as such and they're optimizing against each other, the market could lose much of its human element, as in the inefficiencies born from fear, greed, and irrational behavior are what create opportunities in the first place.

Lack of flavour

Human traders are profitable because we're irrational. We panic. We FOMO. We hold onto losing positions too long because we're emotionally attached and sell winners too early because we're scared. These are part of the features that create inefficiencies make trading profitable.

Remove humans from the equation, and you're left with a hyper-efficient market that makes it paradoxically harder for everyone, humans and AI alike, to extract consistent edge from.

In our quest to build better trading tools, we could accidentally make trading itself obsolete. Maybe not.

Seemingly, a lot of fortunes have been made and lost in this space within a relatively short timeframe within a secular uptrend that continues to attract both the brilliant and reckless.

This pace of rapid change is the main premise behind why nothing is set on stone, being adaptable is the only edge that doesn't expire.


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