How do the coin trading bot affect the of crypto-currency market
On May 6, 2010, the stock market collapsed. The Dow Jones Industrial Average, the Nasdaq Composite and the S & P 500 immediately lost about 9%, and that’s a trillion dollars! Within 20 minutes most of the losses were won back, and on the 36th minute the rates returned to their previous levels.
The cause of the collapse – cryptocurrency trading bot
The main cause of the collapse was bots – automated cryptocurrency trading platform that manage financial assets. They are used by high-frequency traders who quickly identify small price differences in the market and automatically buy and sell shares.
These bots have long been working on crypto-exchange markets. It is quite true that if you bought or sold bitcoins or ethereum on one of the websites, then you made a deal not with a crypto-currency enthusiast from Silicon Valley, but with software on a server in Shanghai. And it’s not a such fresh development.
The first bots for crypto currency trading and their trading algorithms
First bot Lee was simple: he controlled various exchanges, looking for price differences to use them. The program automatically bought a crypto currency on one exchange and sold it to another one. The profit, according to Lee, was small: in 2012 he wrote at bitcoin-forums that “the profitability on the total trading volume is few percent.”
Relatively simple software eventually brought Lee six-figure profit. Today’s bots are more advanced, and their capabilities are much wider. They use the exponential moving average to build algorithms, monitor the state of the market for a certain period and, based on this, make decisions. These algorithms take on a certain load on the operational crypto-currencies trade, but still can not replace the way of thought and analysis of the “live” trader, who must find out how the asset can behave and what strategy to choose.
Such crypto trading strategies are not easy to configure, and none of them can be created a bot. By the way, let’s consider the most noteworthy of them.
Popular cryptocurrency trading bot
Zenbot is an open source platform that can be downloaded from GitHub. You can change the code yourself to create automatic trading rules based on the chosen strategy. Another bot, Cryptotrader, is a simpler solution, but you will need to pay .0007 BTC per month for trading with a limit of $ 1000. There is a version for $ 20 000, but for its use you will have to spend from 0.0028 BTC per month.
The leading cryptocurrency trading platform for today is Haasbot, which is popular among professionals. Its cost for beginners is 0.05 BTC, standard version – 0.09 BTC, extended – 0.14 BTC for three months. Earning on this platform will require serious investment.
The volume of transactions made by trading bots
It is difficult to estimate the percentage of crypto-currency transactions that bots make, not people. Bitcoin is relatively anonymous and unregulated, so traders do not report on their trading volumes. According to a study published by Bloomberg earlier this year, automatic transactions account for up to 80%, which is facilitated by persisting opportunities for arbitrage between exchanges, low transaction fees and round-the-clock trading on the crypto-currency market, as well as the ability to place servers of traders near exchange servers to minimize delays, which is especially important in high-frequency trading.
In this regard, the actual question is what influence bots have on the market. The simple algorithm of Joseph Lee is able to make new platforms with small trading volumes more stable, providing them with liquidity. This scheme has long been used on stock exchanges. During the collapse in 2010, the protective systems built into trading algorithms also worked, which helped to stop the fall when it exceeded the preset level of volatility.
The problem is that the crypto-currency markets are generally more volatile and their dynamics are more difficult to predict. They are largely influenced by events that bots can not analyze, such as statements about new crypto currency restrictions in China. Also, there is always the possibility of hacking a bot.
Perhaps the development of bots will really make the crypto-currency market more stable. So, they will be able to smooth out the difference between prices on different exchanges, to prevent arbitration and to stop falls- as well as provoke them.