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The Impact of New Financial Crises on Technology-Based Asset Classes: Systemic Threats and Hedging Strategies in AI and Blockchain Investment

The Impact of New Financial Crises on Technology-Based Asset Classes: Systemic Threats and Hedging Strategies in AI and Blockchain Investment

Bitget-RWA2025/12/06 23:36
By:Bitget-RWA

- AI and blockchain reshape finance but introduce systemic risks like synchronized market crashes. - 2025 Bank of England study warns AI-driven strategies using shared data could trigger cascading liquidity crises. - Blockchain offers resilience via DeFi platforms but crypto volatility creates feedback loops in traditional banking. - Strategic hedging combines AI dynamic portfolios (12% 2024 outperformance) with NIST/EU regulatory frameworks to mitigate risks. - Future stability requires balancing AI innov

AI and Blockchain: Transforming Finance and Introducing New Risks

The fusion of artificial intelligence (AI) and blockchain technology has dramatically altered the landscape of financial markets. While these innovations have unlocked new opportunities for investors, they have also brought about complex systemic risks. Reflecting on the years 2020 to 2025, it is clear that AI-powered decision-making and blockchain-based assets drive both progress and potential instability. This article explores the inherent risks of these technologies, reviews effective hedging strategies, and offers guidance for navigating the unpredictable intersection of AI, blockchain, and global economic disruptions.

Risks Associated with AI-Driven Finance

AI's capacity to analyze massive datasets and make rapid decisions has revolutionized trading and investment. However, this same speed and efficiency can magnify weaknesses within the system. According to a 2025 report from the Bank of England, widespread adoption of similar AI investment strategies—especially those using common data sources or generative AI models—could lead to synchronized market swings, including sudden crashes or speculative bubbles. For example, if multiple AI platforms issue sell orders at once during a downturn, they could intensify liquidity shortages, echoing historic market collapses like those in 1929 or the early 2000s. Conversely, uniform buy signals during bullish periods may push asset prices to unsustainable heights.

AI and Blockchain in Finance

Recent quantitative research confirms these concerns. Studies from 2024 indicate that AI-driven models—such as support vector machines and random forests—are more effective than traditional methods at detecting early signs of financial crises. Yet, these advanced tools can also increase systemic fragility if not properly managed. Notably, a 2025 publication highlights that large language models (LLMs) used for stock forecasting often generate similar trading signals, raising the risk of collective market movements.

Blockchain: Source of Both Vulnerability and Strength

Blockchain is often praised for its transparency and decentralized structure, but it also introduces distinct systemic challenges. Between 2020 and 2025, digital currencies like Bitcoin and Ethereum became both speculative instruments and safe havens during periods of economic uncertainty. Their volatility and growing integration with mainstream finance have created new feedback mechanisms. For instance, a 2025 study found that disruptions in the crypto market—such as the 2023 failure of a major stablecoin—significantly heightened systemic risk for banks and insurance companies.

On the other hand, blockchain’s permanent ledger and programmable smart contracts can enhance financial resilience. Decentralized finance (DeFi) platforms have shown the ability to provide liquidity and reduce counterparty risk during crises. However, unresolved issues such as insufficient regulatory oversight and interoperability limitations continue to pose challenges.

Strategic Hedging Approaches and Real-World Examples

To address systemic threats, investors are increasingly turning to AI-powered hedging techniques. Assets like gold and Bitcoin have become essential components of risk management, especially in times of heightened uncertainty. For instance, a 2024 study revealed that while Bitcoin served as a safe haven during the Russia–Ukraine conflict and global energy turmoil, Ethereum demonstrated even stronger links to traditional safe-haven assets.

Dynamic portfolio management using AI is gaining momentum. Hedge funds that employ AI-based trading strategies reported an average outperformance of 12% in 2024, according to the SEC. Advanced methods such as reinforcement learning and confidence-based classification allow for real-time portfolio adjustments. A notable example is the use of a Double Deep Q-Network (DDQN) model to optimize cryptocurrency trading, helping to minimize losses during periods of high volatility.

Regulation is also critical. Frameworks like the NIST AI Risk Management Framework and the EU AI Act offer structured approaches to managing AI-related risks, emphasizing transparency, governance, and risk categorization. When applied to blockchain portfolios, combining these frameworks with systemic risk analysis—such as network theory and entropy-based optimization—can strengthen defenses against coordinated AI-driven disruptions and external shocks.

Looking Ahead: Fostering Innovation While Ensuring Stability

As AI and blockchain technologies continue to advance, maintaining a balance between innovation and financial stability is essential. Central banks and financial institutions should focus on developing robust AI-to-AI communication protocols and automated crisis response mechanisms to prevent coordinated market failures. Investors, meanwhile, are advised to diversify across both traditional and digital assets, utilize AI for adaptive hedging, and adhere to strong governance standards.

The experience of 2020–2025 demonstrates that technology-driven asset classes are not inherently safe or hazardous. Their long-term success depends on proactive risk management, flexible strategies, and a deep understanding of how AI, blockchain, and the global financial system interact.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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