Trading cryptocurrency has become a highly profitable activity. The high profile of the market, coupled with low entry costs and huge potential for success, has made it attractive to investors.

Many of these investors are new to trading. They’re often not professional traders, and have little to no experience of the industry. Enticed by the media storm surrounding crypto, and the possibility to get rich overnight, they make the decision to get involved.

There is a lot of money to be made in cryptocurrency trading, and it’s a friendly market to newcomers. Over the course of 2017, Bitcoin’s value increased by more than 15X, marking astronomical gains for early investors.

However, there’s room for improvement. There’s a lack of reliable, evidence-based resources available to crypto traders, and as a result many people end up relying solely on their gut instinct or anecdotal evidence when making investments.

That’s a bad move — and a recipe for big losses. But there is a solution. Machine learning, backed up with serious scientific analysis of data and collaboration between experts, could help crypto traders really boost their chances of a good outcome.

First, it’s important to take a look at the problems involved when data is removed from trading.

Having problems with your gut?

In business, over-reliance on emotions tends to lead to mistakes. And mistakes, in the financial world, can be extremely costly.

Still, that doesn’t seem to be stopping people. In a recent survey, 58% of respondents said they base more than half of their business decisions on their gut instinct, rather than evidence or data. Interestingly, the more successful companies were more likely to rely on information when making decisions, whereas less successful ones tended to use their gut.

This applies to trading, too. While there’s no doubt that gut instinct can lead to good results from time to time, it’s generally much better to stick to a trusted, evidence-based plan.

The trouble is that this is hard in the world of crypto. There’s a huge amount of conflicting evidence flying around, much of it purely anecdotal. Many newcomers to the industry rely heavily on the advice of so-called experts on internet forums and social media, many of whom are no more experienced than their followers.

The result is that the blind end up leading the blind. People miss out on good opportunities, fail to spot warning signs, and get caught up in a wave of hype. All of this is a one-way street to losing money.

So what’s the solution? How can crypto traders find the resources they need to make fact-based decisions that yield solid results?

The blockchain answer

Currently, finding reliable data and analysis-based information in the crypto community is hard. That’s because there isn’t much of it — popular forums are dominated by hype and the mainstream media is awash with scare stories and negative predictions.

However, the genuinely useful information is out there. It’s just scattered around, but it could be possible to bring it all together into one platform.

This is where data scientists and crypto traders could really help each other. By analysing markets and creating algorithms, data scientists could change the way crypto investors do their thing.

That’s what Signals, a new blockchain-based company, is working on. They’re building a community where data scientists can use algorithms and machine learning to help crypto traders maximize their profits.

They will do this by analyzing things like coin market performance, crowd wisdom, general media buzz and a wide range of other things. Using their expertise to build a genuinely evidence-based approach to cryptocurrency trading, they could transform the market.

In addition to this, users of the Signals platform will be able to copy and sell their own successful trading models to generate extra income streams. The platform will provide a community where people from various backgrounds can share advice and knowledge, and draw on the expertise and skillset of others.

The platform will reward participants with SGN tokens, which can be traded for other services or exchanged on the crypto market.

This idea is nothing new in the world of finance. Trading institutions have been using algorithms and machine-learning for decades to remove gut feelings from the process. They learned long ago that by cutting out human emotion it’s possible to minimize the risk of error.

Cryptocurrency trading is still a young market with a lot of growing up to do. By shifting to a more evidence-based approach to trading instead of promoting gut decisions, it’ll gain credibility and be taken more seriously in the finance industry.

For traders themselves, a more data-driven approach will help them make better decisions, avoid losses, and ultimately make more money.