Deconstructing Crypto Episode 9: AI and the Gamification of Financial Markets

The Allen & Overy Podcast archive

Todd Fishman and Gene Ingoglia are back with the first episode of Deconstructing Crypto in 2024. In this new episode, Todd and Gene review the rapid transformation of financial markets in 2023 and the opportunities and challenges driven by two interrelated forces: the gamification of trading and the rise of artificial intelligence.

Gamification influences the behavior and preferences of retail investors, who have flocked to online platforms that offer low-cost, easy-to-use, and fun-to-play features. Social media has amplified the gamification effect by creating online communities where investors can share information about stocks, cryptocurrencies, or other assets, and coordinate collective actions to influence market prices and volumes. Social media driven trading, now in combination with artificial intelligence applications, has caused significant market volatility and regulatory scrutiny. Risks include increased market instability and contagion; distorted price discovery and valuation; facilitated market manipulation and fraud; exposed investors to excessive risk and losses; and challenged existing regulatory frameworks and oversight capacities.

Citing those risks, in December 2023, the US Financial Stability Oversight Council in its annual report identified artificial intelligence as an emerging vulnerability to financial institutions.

Todd and Gene explore the role of social media in creating and amplifying market volatility and discuss the implication of AI for market efficiency, integrity and competition.