Artificial intelligence has many applications, from the sublime to the ridiculous. Helping people make smart and profitable investments is a use case at the highly valuable end of the scale.
Giuseppe Sette, the cofounder and president of the online investing platform Toggle AI, said some of its users were beating average stock-market returns by up to 18% by using the technology, and now it is being applied to crypto investing.
Sette, whose background is in quant trading at hedge funds, said the platform provided an “augmented investing experience” that guides users through the markets.
Toggle AI has grown rapidly — it says it has 70 institutional clients with a total of $165 billion in assets using the research tool, as well as 70,000 retail investors, who pay $10 a month. It’s been endorsed by the legendary investor Stanley Druckenmiller, whose firm gave Toggle’s CEO, Jan Szilagyi, his start in 2005.
The system is based on machine learning, which involves feeding huge volumes of data into computer algorithms. The algorithms then identify trends, links, and correlations in the data to indicate the likeliest price movements of stocks and now cryptos.
“We try to focus on the data that is less known or less available to the broader investing public,” Sette said. “So we make a huge effort to bring to the surface fundamental stocks data, macroeconomic data, and try to use the AI not as a black box but rather to provide a ‘glass box’ experience to the user.”
Success depends on the quantity and quality of the data, and Sette said there is a vast amount of useful data that Toggle AI uses in its analysis.
“The machine learning tries to spot what’s really important to know about a stock or crypto,” Sette said. “We do that in terms of the data that comes out of stock analysts, macroeconomics, geopolitical tensions.
“On the news side, we have modules that read all the news and try to come back to you with a selection that tells you ‘This one is most likely to move the market, and we think you should read this.’ It’s not just a sentiment analysis, which is quite common — it’s a proper market-moving analysis in the sense of making sure that you’re aware of specific things that might be relevant for your securities.”
Unlike with stocks, cryptos have no earnings statements or shareholder meetings — but they do have the blockchain. Every movement of coins between addresses is recorded in the public ledger, viewable by anyone. This is a gift to data-hungry algorithms such as those used by Toggle AI.
There is also the historical price data of each crypto to input in the platform, and, in bitcoin’s case, mining data such as new coin supply and the hash rate of the network.
Sette said the platform was developed to be “truly cross-asset” so that it could cover all parts of traditional financial markets. He added that this means it’s suited to expand into new asset classes like crypto.
“We really live, breathe, and eat data all day long, and therefore it was truly interesting and pleasurable to dig deep into the crypto space,” he said.
One eye-catching forecast that Toggle AI has made on the crypto side is that bitcoin will outperform ether by about 33% over the next three months.
“Our AI uses historical data points to mimic the way discretionary investors think. In the specific case of bitcoin versus ethereum, the two major pillars of the crypto space tend to have an important relationship, and we’ve seen time and again that there is a maximum level of the ratio beyond which one needs to retrace and come back to the other,” Sette explained.
“Bitcoin is very much at the lows versus ethereum, and that’s the first thing that the system notices,” he added. “It is a very compelling risk to return. So that’s the first step.” Ethereum’s outperformance last year raised its ratio to bitcoin to a three-year high of 0.86 in November. The ratio was 0.7 on Wednesday, according to TradingView.
Sette said other pieces of data were emerging. “Once you dig deeper into bitcoin, there is such a thing called the Puell Multiple, which is a very simple but effective valuation measure that tries to estimate how much supply we have from bitcoin in ratio to historical levels,” he said.
Any investor planning to use a platform like Toggle AI’s should keep in mind that no forecast is guaranteed to be correct, that crypto can be highly volatile, and that research from multiple sources is necessary.
“Slowly but surely you can see the emergence of a picture that bitcoin is cheap today,” Sette said, “and if it’s cheap and the right catalysts come to the market — maybe an easing of the Ukraine crisis, maybe an easing of inflation — all of a sudden you could see bitcoin rally very meaningfully.”