AI Helps with Bitcoin Trading   [12.02.20]

From research topic to business idea: With the help of artificial intelligence and data mining, Hohenheim business information scientist Dr. Achim Klein wants to help investors profit from trends with 10% returns in Bitcoin. "The CryptoCaptain service navigates the highly volatile market with early timing and thus makes it accessible to small investors. "As the first digital stock market letter, CryptoCaptain automatically evaluates the mood on the market, which drives and reinforces new trends," explained the company founder, who is based in Hohenheim. The start-up project "Crypto-Captain" is funded by the Federal Ministry of Economics and Energy and the European Social Fund as part of the "EXIST-Gründerstipendium".

Mr. Klein, what is the business idea behind CryptoCaptain?

There is an enormous potential behind the technology of crypto currencies such as Bitcoin. This includes worldwide payments without intermediaries at low costs. However, when and how exactly this will become widely accepted depends on a wide variety of factors, including political decisions. It is therefore difficult to predict whether we will soon be paying for our purchases with crypto-currencies as a matter of course or whether this will take some time.

For investors, this means that crypto-currencies are a stormy market with high risk, but also opportunities for very high returns. The opportunities arise primarily from strong market trends, which, for example, generated a return of about 100% in Bitcoin from March to June 2019. CryptoCaptain uses artificial intelligence and very large data volumes for the early detection of trends lasting several weeks. CryptoCaptain thus helps investors to profit from these trends and to protect themselves against risks.

Who might be interested in CryptoCaptain?

Unlike other strongly fluctuating markets, such as commodities, crypto stock exchanges are also accessible to small investors on the Internet at low cost. This type of stock exchange includes, for example, Octopus from the USA or the new offers from the Stuttgart stock exchange. Since anyone can trade crypto currencies directly there, i.e. no intermediate instruments such as commodity certificates are necessary, it is possible to enter the market with very small amounts.

Until now, speculation on up and down movements has been the domain of professional traders. With the help of CryptoCaptain, however, even small investors who are willing to take risks can enter this type of stock market business. The accumulation of high yields and compound interest makes even small investment amounts attractive within a year. Especially in times of marginal savings interest, this can be an interesting addition to the portfolio.

However, our digital trading navigator is also interesting for long-term investors who believe in the success of the blockchain technology underlying Bitcoin. CryptoCaptain helps these investors to profit from the major uptrends and to protect themselves from the sharp declines in the market.

What is new about CyrptoCaptain?

The analysis of large amounts of data has been increasingly used in the financial sector for some years now. In the area of crypto currencies, patterns in price charts are mainly evaluated and used to support investment decisions. The disadvantage is that trends in the charts are only recognized at a late stage and that weaknesses in the trend drive up trading costs.

With CryptoCaptain, we are launching the first trend navigator for Bitcoin that automatically evaluates the market sentiment underlying the emergence of new trends. We determine market sentiment from the recommendations, forecasts, announcements, and opinions of investors in influential online media. In this way it is often possible to identify trends as they emerge.

How does CryptoCaptain work and what role does artificial intelligence play?

Our trend navigator is based on an artificial intelligence that automatically analyzes a huge number of relevant texts. This so-called "text mining" is comparable with the procedure of a human reader who forms an opinion on market development by using several media. The only difference is that CryptoCaptain analyzes a very, very large number of media - around the clock.

Unlike a mere mood radar, CryptoCaptain makes it very easy for its users to make systematic entry and exit decisions. CryptoCaptain provides directly implementable trading signals and transparent result reports. At the same time, CryptoCaptain develops and operates comprehensive hedging algorithms to protect the investment capital.

How did the idea develop?

I studied computer science in Berlin. At that time, crypto currencies were not yet a topic, but I was already interested in artificial intelligence in the financial sector. In 2007 I came to the University of Hohenheim for my doctoral thesis and was able to pursue this interest as a research assistant in several research projects.

Within my projects, data and text mining was used in very different contexts. I then focused on the financial sector. The starting point was the EU project FIRST, which I was able to acquire and carry out as a young doctoral candidate with several partners such as the House of Finance at the University of Frankfurt and a large bank. In this project I developed the basic software for the analysis of large amounts of unstructured financial data by machine learning methods.

Later on I was able to build on these results in my doctoral thesis and focused on the automatic analysis of market sentiment from online media. I was able to show that a significant excess return can be achieved when selecting stocks in this way. The results were so encouraging that my interest was awakened to develop a service from my research topic that actually helps investors in their decisions.

You can already report an initial success: An EXIST start-up grant from the Federal Ministry of Economics and Energy. What does that mean for you?

I will receive a scholarship and a budget for investments for one year. In a certain sense, the scholarship feels like a new research project to me. Because I can continue to use the university's premises and infrastructure to refine my algorithms.

But there is one crucial difference: I am no longer employed, but work exclusively for my spin-off. This allows me to concentrate fully on my business idea. In this way, the Federal Ministry of Economics and Energy is helping to realize practical applications of artificial intelligence.

My goal is to bring CryptoCaptain to market maturity by mid-2020. A beta version has recently become available for early users at www.cryptocaptain.com. I am also looking for a person with online sales and marketing skills.

 

Interview: Leonhardmair / Translation: Neudorfer