Trading bots in themselves are very useful for the average trader. Unfortunately for crypto traders, the market never sleeps, which sometimes forces the traders themselves to skip a few hours of sleep themselves. Naturally, this is a very unhealthy habit, which required some solution from the service providers.
Thanks to an already existing product on traditional financial markets such as stocks and Forex, these companies were able to adapt trading bots to their platforms. This provided much-needed control over assets, for the crypto traders and ensured a peaceful night of sleep.
However, many now believe that crypto trading bots are a product of a bygone age and cannot be relied upon anymore. Is this true? Let’s find out.
The nature of crypto trading bots
The bots in their core are just algorithms that react to various price changes within the market. Although the fact that their reaction speed is faster than any human can hope of achieving, it can also be their greatest weakness as well.
After companies found out that these trading bots were getting very popular with the traders, they felt comfortable to ramp up their spreads. This ensured that no second-trading would happen as selling newly bought coins would end up as a loss or nothing at all. All the traders had to do was decrease the demand on trading bots to convince these companies to return to conventional spreads so as to make the feature useful again.
Influence from the corporation was the first issue that trading bots faced, but there were, even more, appearing despite the decline in popularity.
The popularity was so intense, that rumours were shared on social media about trading apps that made their users daily profit and were endorsed by celebrities. One of these curious apps was the Bitcoin Loophole, which was said to be endorsed by Elon Musk and the Dragon’s Den.
After a while, many scammers started using the robot interface with promises to make daily profit to their users and spread advertisements all over social media, which was the trigger to ban crypto related advertisements on social media giants suchlike Facebook.
A decrease in volatility
Although large spikes and fluctuations can still be seen with the crypto market, it is still a shadow of its former self during the last few months of 2017. The volatility was so high back then that a 500% increase overnight was realistic. Therefore traders had to rely on their trading bots to do the trading for them during the time, so as to not miss any large spike.
However, after the crypto winter, when Bitcoin lost most of its value, the probability of seeing massive gains overnight became close to zero, therefore long-term investments became a lot more common.
Since crypto trading bots were mostly used for short-term trades, their usage decreased drastically, and some platforms even removed the feature. As of today, however, looking at how Bitcoin has managed to recover (relatively), crypto trading bots may be able to stage a comeback if the volatility keeps rising.
The current situation
The current situation of the crypto market cannot be compared to the end of 2017, obviously, but it is still famous for its volatility compared to traditional financial markets. The promise of making large profits overnight still lures a lot of beginners to the crypto market, which the invested capital overall.
Furthermore, seeing how large exchanges like Binance are considering to offer margin trading on cryptos, it is expected to see another crypto boom by the end of 2019, but on a much smaller scale than 2017.
That crypto boom will be the inertia needed for crypto trading bots to become valuable again. If the boom fails to happen though, the HODL mentality of the crypto community will not change, thus keeping crypto bots under the radar.