July 23, 2024

ChatGPT advises investors with high risk appetite to invest in cryptos. Should you take the plunge?

If you ask ChatGPT, the popular artificial intelligence (AI) chatbot, about the most feasible investing option one could explore as a high-risk investor, it promptly asks you to put your money in cryptocurrencies, among other options.

Not only does it suggest investing in cryptos, but it also shares with the inquisitive user the key reason for doing so.

It says that the cryptocurrency market is highly speculative and volatile, and therefore it is suitable only for the high-risk investors who are seeking substantial returns. Among the popular options are bitcoin, Ethereum and other altcoins, it further advises.

ALSO READ: Bitcoin reaches all-time high of $72,000, should you invest?

Whatever advice ChatGPT may give, one is advised to take its advice with a pinch of salt. It is, therefore, not recommended to completely rely on a chatbot based on large language models (LLM) despite its colossal potential to answer a range of queries without skipping a beat.

“Although ChatGPT provides recommendations, how far it works for an individual is not known. It does not understand the psychology of an investor. There are behavioural problems with people’s mindset. And the investing journey calls for a lot of handholding to handle the psychology rather than merely learning the tips to invest money,” says Sridharan Sundaram, a Sebi-registered investment advisor and founder of Wealth Ladder Direct.

Cryptos’ volatility

Notwithstanding the chatbot’s advice, there is no denying the fact that bitcoin and other cryptocurrencies are highly volatile. Bitcoin’s prices have declined nearly 10 per cent in the past one month alone after a bull run seen in the wake of a green signal given by the Securities and Exchange Commission (SEC) to spot bitcoin ETFs in January this year.

On Thursday, bitcoin traded at $58,521 (1.28 per cent up), Ethereum at $2,978 (2.37 per cent up), tether at $1 (0.10 per cent up), BNB at $560 (1.83 per cent up) and Solana at $136.63 (10 per cent up), shows CoinDesk data at 1.16 pm GMT.

Notably, bitcoin witnessed nearly 6 per cent fall on Wednesday to trade at $57,000, registering its worst monthly performance since April 2022. This downturn can be attributed to the withdrawal of funds in anticipation of the interest rate decision from the Federal Reserve.

Besides cryptos, the Open AI-founded chatbot also asks investors to explore other investing options such as derivatives, penny stocks, high-yield bonds and highly volatile sectors such as technology or biotech.

Derivatives: Derivative financial instruments such as options and futures are prone to excessive gains as much as losses.

Penny Stocks: These securities represent small companies with low market capitalisation and trade at low prices. They are extremely volatile and offer scope for substantial gains or losses.

High-yield bonds: The bonds that are issued by organisations with low credit ratings usually offer higher yields but have a high degree of risk. So, investors who have a high-risk appetite are encouraged to invest in high-yield bonds.

(Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision.)

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