Trading bots are just programs created to keep an eye on market conditions and place trade orders for execution on behalf of a trader without human interruption. However, about 80 percent of the trade in the crypto market is executed and controlled by machines.
However, appointing computers is always good and more profitable than human beings as they can give better results. However, this opens several new strategies that a trader can use. However, this is known as High-Frequency Trading, which enables the high-end user to get rapid results.
The programs are based on artificial intelligence and machine programming, which executes the order to get profitable yields. The bots decide which order is to be placed with the help of predefined algorithms and conditions provided by the user. Traders and giant investors often use this trading bot as it best suits crypto trading markets. Users can modify the strategies as per their needs.
What Makes Crypto Market Influential to Algorithmic Traders?
Cryptocurrency deals with online trading having only digital assets to hold, buy or sell. So it makes a crypto trading bot integration simple and easy as bots also work on digital aspects. Algorithmic traders operate 24/7 and can execute orders according to the time slot given by the trader. Comparing different platforms’ data is instantaneous, which only a program can do.
The decision-making ability of algorithmic trading bots is far from emotions best suited to the crypto market. If the trading is permitted to the computer program with necessary data and conditions, it works effortlessly and does not require our time and efforts to monitor or operate. With such high-end features, it can also help generate a passive income. One of the best sides of the crypto market is that it will never stop functioning.
Effects of Crypto Trading Bots on the Crypto Market
The crypto market is also rising with the rising demand for crypto bots. The bots can react quicker than the investors, which leads to getting the best possible trade, which the bots can only perform.
As per the analytics, an 80% rise in crypto trading volume has been noted due to using crypto trading bots. The algorithmic strategy can compare the exchange prices and place an order quickly before the price change. Another area where the algorithmic crypto trading bot is enhancing the crypto market is liquidity. Liquidity ensures sufficient sellers and buyers so that the traders can trust this market to buy or sell the assets per their needs.
Having benefited from the liquidity gain, it may also create room for scammers with pumping and dumping strategies. The bots can easily manipulate crypto markets by artificially inflating the price. The automated trading behavior of bots leads the traders to overpay for the coins while purchasing. Another major risk might be in the worst condition, but decentralized data can be manipulated by some hacking experts, keeping investors’ funds at risk. When a huge number of bots function simultaneously in an extremely volatile market, it sometimes causes the price crash of the first detected signals. So the bulls who bet a huge amount have suffered a big loss due to this flash crash. Observing the Bitcoin boom, more and more retail traders are entering the crypto market, making the risk of pump-and-dump traps for new investors more likely to occur.
With algorithmic bots, the trade will be executed automatically 24/7 without human intervention, which keeps the trader highly reliable. More liquidity is generated due to its quick decision-making strategy and faster execution of placing orders, which humans cannot do. Because of this feature, trading activities have significantly increased on various crypto exchange platforms. As the bots are highly reliable, there has been an increasing demand for crypto bots, further increasing the trade volume in the crypto space. There is no surprise that the use of highly defined bots by high-end users has influenced the cryptocurrency market in a big way.