The impact of artificial intelligence on the democratization of profits in financial markets

Abstract

Through an agent-based simulation of the cryptocurrency market, the study assesses the ramifications of an AI-powered entity making predictive market interventions on the retail investor’s ability to generate profits. Emphasizing simplicity and realism, the model reflects realistic market mechanics and diverse investor behaviours. The results reveal stark contrasts in returns, where regular investors experience negative returns post-AI agent introduction, while the AI agent consistently achieves significant profits. This study highlights potential challenges for individual investors in markets increasingly dominated by AI-equipped entities, emphasizing the need for discussions on fairness, transparency, and accessibility in finance amidst AI proliferation.