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What’s the Role of Bots in Crypto Trading?



What's the Role of Bots in Crypto Trading?

Cryptocurrency markets are experiencing one of the longest and harshest downtrends in history. The cryptocurrency market is plunging to a new low every day.

The crypto giant, Bitcoin, is at its 18-month low, plunging to $19,300 (July 2). It is down by around 44% compared to last year. Meanwhile, the second-largest crypto Ethereum fell over 50% to $1,060.

The global crypto-market has shrunk from $1.02 trillion to $865 billion, an 11 percent decrease, according to CoinMarketCap. All major cryptocurrencies have been trading in the red lately, with the fall testing even long-term investors.

With many crypto projects announcing bankruptcy and several companies cutting their workforce and stopping hiring, the usual “crypto is dead” headlines are hitting the mainstream media. Things aren’t looking good.

For those who have been into crypto trading and investment for a long time, it is known that bearish and bullish runs greatly characterize the crypto market. In the recent bullish run in late 2020 during the COVID-19 Pandemic, which ended in late 2021, prices can rise by several percentages in a day. During those times, investments and trading rose to their peak because it felt as if the market was destined to always go up without a fall.

But in a bear market, the prices might fall by almost 90% within a day and another 90% before the day ends. It feels like the crypto might later go useless with the huge price slash it receives per day.

What's the Role of Bots in Crypto Trading?

Crypto Market Bearish Runs and Trading

Although the previous crypto bear markets coincided with bullish sentiments in equities, crypto is now tightly correlated to a macro environment with a recession on the horizon. Cryptocurrencies volatility and global inflation is one of the deadliest combinations in the finance industry. Crypto Trader trade against prices of assets which changes drastically in the crypto market within minutes while inflation also affects the prices.

The always-active cryptocurrency market can be nerve-wracking for professional and casual traders. The nature of the market limits the effectiveness of human interaction, involvement, and trading in the crypto metaverse in many ways.

The combined effect of these factors leads to the tremendous increase in the popularity of cryptocurrency trading bots. A bot is a computer program that follows a set of pre-defined rules to carry out some action. In the context of trading, some bots are designed to automate trades, while others offer more sophisticated functions such as risk assessment.

The evolution of the traders’ and investors’ mentality from the phase of the inability to react quickly enough to changes in prices to achieve optimal trade to sleeping peacefully and concentrating on other tasks is intriguing. Knowing that the bots take care of things; has been the importance of the crypto bots in the arbitrage world.

If you want to learn more about how they work and why they’re valuable assets for traders like yourself, read on!

What's the Role of Bots in Crypto Trading?

What are Trading bots?

A trading bot is a program that executes trades automatically in response to market or financial data. Trading bots are typically used by large investors, such as hedge funds and professional traders. Still, they’re also popular with smaller investors who want a hands-off way to trade cryptocurrencies.

Trading bots differ from algorithms because they allow you to customize them and then run them repeatedly until you change something. They’re also different from strategies because they run on their own in real-time rather than once per day or week (or whatever your strategy calls for).

 What are Crypto Bots?

In simple terms, Crypto Trading Bot is a piece of software designed to execute trading decisions on the traders’ behalf, according to a tailored algorithm.

Hence, the market statistics or analysis noted by investors/trader plays a crucial role in implementing crypto bots in the market. Crypto trading bots can easily automate the analysis and implement it while trading.

These bots can be programmed with many different strategies and will execute trades for you automatically based on preprogrammed rules. These strategies combined help them pick up signals faster than humans, which gives them an edge against human traders!

Therefore, the ability of bots to make profits depends on the algorithm and analysis or script provided by the trader.

What's the Role of Bots in Crypto Trading?

Do Crypto Bots work?

Investors seek out trading bots based on strategies that will be most profitable. However, new traders looking to make huge profits by relying on bots may struggle due to technical know-how and strategy to implement.

A crypto bot with a rigid algorithm will only assist the user/trader as the cryptocurrency market is dynamic. No permanent trading strategy can work for a long duration. That’s why Off-the-Shelf/Pre-programmed crypto bots are effective for a limited period.

However, if a trader will implement custom-built crypto bots, the trader should be prepared to analyze and re-program the trading strategy accordingly. Thereby, traders can frequently supply the bots trading scripts to follow based on the analysis and strategy used. Therefore, the sustainability of profits depends on the analysis knowledge and technical fitness of the trader in the market.

The role of AI in the future of crypto trading

One of the most interesting things about the future of cryptocurrency is that it’s completely uncertain. The more popular crypto becomes, the more governments and financial institutions regulate it. This means that there are fewer decisions for you to make about your investments—which is great news if you’re new to crypto trading.

But even better news for traders who’ve been in this game for a while is how artificial intelligence (AI) will help us make smarter trades in a world where regulations are becoming increasingly strict. AI can essentially be programmed to do anything from making trades on our behalf to detecting signs of fraud before we commit any money—and it may soon become an integral part of every trader’s toolkit.

Advantages of Crypto Trading Bots

There are many reasons to use a bot, including:

  • To increase your profit. Bots allow you to trade more efficiently and effectively than if you were trading manually.
  • To reduce risk. Bots can be programmed to only enter trades when certain criteria are met; these criteria may include price volatility, volume, and even past performance of assets (such as Bitcoin’s historical volatility).
  • To reduce time spent on trading by automating the process. Instead of spending hours every day manually analyzing charts and market data, a bot will do this for you while you sleep or relax with friends. This means that you have more time available for tasks other than monitoring prices all day long!

In conclusion, investing in cryptocurrency is a complex process. While you can make some informed decisions based on your research, an automated solution can save you time and effort.