Exploring The World Of Crypto Bots As They Continue To Gain Momentum, For Now

Published on

It’s the summer of crypto – it just depends on who you ask.

While crypto bosses are facing an uphill battle with regulatory institutions, others are waiting for the dust to settle following the collapse of several global crypto exchanges, with the most historic perhaps being the fall and bankruptcy of FTX back in November 2022.

Elsewhere, investors and traders are experiencing a completely different crypto summer. It may seem as if the multi-month bearish winter has started to wane, leaving major cryptos, including the likes of Bitcoin (BTC) and Ethereum (ETH), among others making big improvements from the same time last year.

BTC broke the $31,000 threshold back in June 2023, after ending last year with an unimpressive $16,000, falling from its near $70,000 peak reached back in November 2021. Current price movements indicate a nearly 81% year-to-date improvement in performance.

The same can be said about ETH, the second-largest coin on the market, which already gained more than 60% to date.

With the crypto winter in the rearview – for now at least – investors are enthusiastically entering the market once again, but this time they have something different up their sleeves that will help them navigate tumultuous market conditions, crypto trading bots.

The Summer Of Crypto Trading Bots

With the digital currency market experiencing hyperbolic performance once again, at the same time, there has been a notable increase in the number of investors and coin traders continuously leveraging the use of automated trading tools and software.

Commercial interest in crypto trading bots has just like the market experienced its ups and downs, however, this time many are finding increasing advantages of using automated bots to do the work for them, and it’s beginning to catch on among many crypto enthusiasts.

In the U.S. research shows that roughly 43% of American cryptocurrency traders are now making use of bots in their day-to-day trading.

This has led to further considerations of their effectiveness, with the same research showing that more than 53% of traders that currently make use of bots have reported an increase in profits, while less than half – 23% – have reported a decrease.

The benefits of using crypto bots continue to see a rise in popularity, especially among younger, less seasoned digital asset traders and investors.

Not yet sure what crypto bots are? Well, in short, we understand crypto bots as automated software that uses trading algorithms to help analyze market data and further improve trading opportunities

The dynamic crypto market, albeit volatile, continues to see companies develop tools that help to fuel the expansion and adaptability of cryptocurrencies within the traditional economic landscape.

In an attempt to help traders, more so novice trades, leverage greater opportunity from the crypto market exchange, developments in automated trading tools have equipped them to leverage bots to execute trades based on a wide range of determining factors.

Yet, one might argue that trading bots are nothing new, other financial markets have been using trading bots for quite some time already. Determining the difference between traditional trading bots and crypto bots is marginal, however, like with many crypto-related things, the deeper you look, the more complicated things become.

Crypto Trading On Autopilot

For those that are still not sure what trading bots might be, or what their function is, think of trading bots as putting a car into autopilot. Advanced machine learning and algorithmic software do the driving, while you keep your eyes on the road, or in this case, in which direction the candlestick moves.

However, nothing with crypto is ever easy to understand, so over the last several years, developers have brought to life several interesting and more dynamic crypto trading bots and features to help give investors more agility to navigate through the market.

Without getting too technical, crypto trading bots, like stock trading bots can have different functions, aside from having risk management parameters or profit triggers.

Some traders have started using arbitrage trading, which allows their portfolios to have increased exposure to price discrepancies across different markets or among different forms of crypto to have better chances at making profits.

More advanced Dollar-Costing-Average systems or DCA bots today can make trades on behalf of investors and can be customized based on a range of technical indicators and trader strategy orientation.

With DCA, investors can divide their investments into smaller segments, allowing them to buy crypto stakes at various points over a longer period. These efforts allow them better actionable results, but also better average prices for their position.

Instead of jumping into the crypto market with a lump sum of money, and splashing it all over the market, or throwing it into one bucket, and running the risk of losing all of it – investors can now use DCA bots to invest in cryptocurrencies at preset intervals.

Then there are market-making bots, which use advanced algorithms, to place buy and sell orders to further increase market liquidity. Portfolio bots have also started to see increased attention, which helps traders manage and adjust their portfolios more efficiently, to maximize their profits, and further decrease any potential risks.

Other, more advanced, and seemingly risky bots include high-frequency crypto bots. With automation tools and machine learning software, these bots can buy and sell crypto assets at high speeds across the market.

Developments for crypto trading bots are continuously changing, and innovators are adapting the software that operates these bots. The idea for crypto bots, at the beginning, was to have software that will provide traders and investors with non-stop, around-the-clock access to the best market prices and opportunities. However, things have moved far beyond a 24/7 trading assistant in recent years.

Rapid advancement, largely driven by investments and pent-up trader demand, has seen crypto bots rise to prominence in a short span of time.

Yes, there’s an undeniable allure that surrounds crypto bots. Their efficiency, having the ability to program computerized software to minimize trading errors and navigate tumultuous market conditions that can take place at any given moment.

Ultimately, for many, the goal is to implement bots that can deliver efficient, non-bias, and on-demand trading availability. The combination of commercial machine learning intelligence, increased investor interest, and ongoing trader demand has only enlarged the scope and greater understanding of crypto trading bots.

Where Are Crypto Bots Heading?

The next frontier of crypto trading could look a lot different in the coming years. Already we’re witnessing a seemingly inflection point between different pockets of the digital asset market meeting at several crossroads, only further increasing the ability for automated trading to become more efficient, and perhaps more reliable.

There’s a sense of convenience that’s being associated with crypto trading bots in comparison to more standard trading algorithms.

Bots are now available to be purchased separately, as software models that can be directly deployed into Decentralized Finance (DeFi) or DEX platforms. Some models can be used with existing APIs, which allows traders to place automatic buy and sell orders on DeFi and DEX ecosystems.

With crypto bots taking more control of the market, traders will need to consider how automated software can complement their trading strategies. Ultimately, with so many options currently available, traders and investors will need to be more informed and make more educated choices when choosing whether or not to implement bots into their trading.

Furthermore, traders will need to consider other factors, including trading protocol, security, level of customization, and whether or not these bots can be reliable, both in the short and long term.

As with anything, inside and outside the crypto market, there are some downsides to using crypto bots. There have been multiple incidents where traders reported falling victim to crypto-related scams that were associated with bot-trading features.

Crypto and digital asset scammers have been cashing in on the craze as uninformed novice traders enter the marketplace, hoping to turn their enthusiasm into massive earnings. Many have wondered whether crypto bots could potentially further drive an uptake in the number of reported crypt-related scams taking place on the decentralized network?

Although companies, more so crypto exchange platforms, have heavily invested in the software and technology to support crypto trading bots, efficient, and reliable security protocols would be required to ensure the safety of traders and their wallets.

However, cybersecurity risks remain among the highest, and perhaps the most worrisome feature of crypto trading bots, both for novice and seasoned professionals.

Cyber security could potentially deter bad actors, but the burden, and the price for this software would land in the laps of crypto exchanges and digital currency startups. Seeing this as a long-term investment, rather than a near-term necessity further drives cost implications, and the potential of stabilizing bottom line performance in an already shaky crypto market.

Yet, this is not something only found in the crypto market. There has been a strong uptake in the number of malicious players and bad actors entering the market, as a growing number of traders become active online, and more consumers transition into the digital ecosystem.

Perhaps one of the more challenging sides of crypto bots will be the importance of cybersecurity and regulatory protocols, something which developers and investors are piling behind, as the crypto-related scams become more prevalent, and the stakes grow increasingly big.

These types of developments could help prompt the importance of providing novice and more seasoned traders with sufficient educational resources to help them better understand and identify possible scams. But there is still little known about the dangers of the face of crypto scams and how to spot them.

While crypto bots could help minimize the exposure to these types of scams, it further decreases traders’ understanding of what potential scams can look like, and how they can avoid them.

Crypto bots and scam-related activities are now facing off one another, each yielding a double-edged sword, and the victims in this case are unsuspected traders that are new to the digital asset market.

Final Thoughts

The crypto market is experiencing monumental change. With the crypto winter beginning to wane, and a more promising outlook taking shape, investors and traders are once again warming up to digital assets, albeit slowly.

While investors are trying to cash in from earlier losses and stabilize their foothold in the marketplace, developments elsewhere are creating an entryway for novice traders onto the market, however, it doesn’t come without a series of risks and challenges.

Crypto bots could potentially unmask the harsh realities of crypto scams and malicious activities, however, this leaves little exposure for traders and investors to understand how these scams unfold and how to identify them.

The resulting factor would encourage trading platforms to further enhance their cyber security efforts, but placing the costs of these additions in the hands of the companies that operate the platforms. This only furthers the question on who is actually winning in the race to the top of the crypto market?

Although some crypto enthusiasts remain divided over whether or not crypto bots will remain an integral part of the future of digital assets and cryptocurrencies, those that leverage the opportunities of bots, within the regulatory framework, could find themselves being more on autopilot than they may think, yet a reminder that this is only temporary, and the real trading continues to be in their hands, and not that of machines.