Crypto currency

Neural networks will heal the market from speculation and will create a new financial crisis

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In a previous article we wrote about what algorithms are used by traders, and how widely used of the neural network. The study of this question our experts raised the issue under a new angle and later in the article, you will learn their opinions on the future of not only digital, but also the global economy. The main question is: how to make the crisis of 2008 was not repeated, and what role in this process is the rapidly growing market for AI technologies.

Echoes of the 2008 crisis – lessons for the future

The global economy still not fully recovered from the global financial crisis of 2008. We all remember well the night of Monday 15 September, when one of the largest U.S. Bank Lehman Brothers announced its bankruptcy. And after it rained the whole house of cards – Washington Mutual, General Motors, Chrysler also went bankrupt. Some large banks took advantage of the collapse to shift the focus: so, for example, JP Morgan Chase bought the assets of Washington Mutual for $136 billion for just $1.9 billion And Morgan Stanley and Goldman Sachs instantly transformed into a Bank holding company.

The world economy burst like a soap bubble inflated by the stock exchange. However, the background was back in 2006 in the US, when effective people has become less, and the mortgage crisis first made itself felt. In 2007, the situation has become more global, when for the whole year and banks of other countries has suffered a loss of $390 billion, of which a large proportion has fallen on Europe.

One of our experts, Amardip SINGH, Professor and founder of the DLT-company-based AI technology, in an exclusive interview for expressed the opinion that survived only those countries that “did not participate in any of these pointless trades”. According to Mr. SINGH, the most resistant to the crisis were the countries with traditional economy: “China is focused on manufacturing and India on the fight against outsourcing, and they just stuck to the plan. They did not attract too much foreign direct investment, and simply continued to support the national economy in the traditional way. And Russia, too, was OK, I mean its economic flexibility.”

The 2008 crisis led to a fall in the value of U.S. corporations is 40%, and companies in the European markets reached the level of 50%. World trade shrank by 10%, and the volume of world GDP by 2009 for the first time since the end of world war II showed a negative value.

Now experts report a significant jump in the economy with the coming of neural networks in trading. And this might lead to the next crisis.

The neural network will be able to cure the economy

According to experts, machine learning is an effective preventive tool against fraud in various spheres of life. For example, PayPal in the fight against money laundering analyzes millions of transactions, making their number has been reduced to a record low ratio of 0.32%, compared to the usual for the financial sector of 1.32%. Neural networks are now increasingly used in real business applications. In the field of cybersecurity and disclosure of fraud and risk assessment, they have become the undoubted leader among technical methods. Marketing research and forecasting systems the efficiency of their use is constantly growing.

But Mr SINGH believes that the regulated market of the AI in General could lead to the collapse of a market system based on the trading speculation.

The problem is that now everyone is trying to maintain the markets based on speculation, and this is an unhealthy trend for the economy: in the end we get things like the 2008 credit crisis.

“If you use complex neural networks in trading, programming them for aggressive strategy on short positions that stimulate endless falling market, you end up with the effect of geometric progression, which we saw in 2008”, – the expert believes.

In other words, what we’re seeing in the cryptotrading when the bitcoin bubble first inflates and then bursts, and its value is increasing for many days, tumbling down, there is nothing like an aggressive strategy game on the market. It gives traders maximum profit. As she first gives the opportunity to buy bitcoin at the lower position, and then again begin to inflate the bubble. The main and only aim of any trader is to maximize his profit. And use the AI they will just for the sake of scaling.

“At the moment the problem of the traders is that they all are part of the financial industry, and she doesn’t want to die” – says the expert.

For traders, the profit is all and none, of course, it is not divided.

But if you start to apply the neural network, then the situation changes: huge profits will not concentrate in the hands of certain players, and will accordingly be distributed between all participants. Thus, this situation will benefit cryptoamnesia, because in the end it will stabilize, but for individual trader, such a rotation would be absolutely unprofitable.

Another reason why traders will not widely use AI technology, according to Mr SINGH, the fact that most of them are not engineers AI systems, and have only a General understanding of financial algorithms and academic basis. The expert sees the evolution of trading in a digital world: “In the end we come to a situation where machine learning can teach itself what we call the point of singularity, which will happen in 20 years. Appears self-sustaining AI that can control the entire market and will eventually replace all traders. Because at the moment the stock market is insufficiently regulated, and largely it is based on a huge amount of speculation”.

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