Trading Bots Get Traction Amid High Market Volatility

Crypto trading has proven to be a lucrative venture in the past few years. Still, as with any venture, there are risks involved.

In essence, there are times when the market may move in the opposite direction contrary to what is expected. The market crash in mid-May was one of such moments. While prices of crypto assets were tumbling, trading activities recorded on exchanges reduced, pointing to a general skepticism about trading at such a volatile time.

Within the past few weeks, trading activities have been slowly resuming on exchanges, though the market is yet to indicate that the bulls have fully taken over. A number of factors contributing to the price crash in May may include China's mining ban, Tesla's Bitcoin (BTC) payments discontinuance, and a host of others, including Elon Musk's Twitter stunts. 

Bitcoin maintained a huge influence over the market, at the time. The price of the flagship cryptocurrency itself plunged to a low of $35,000, after grazing an all-time high of almost $65,000, in the wake of a bull run. On the other hand, most altcoins bled by over 50%, with a leading altcoin Ethereum (ETH) plummeting by half from $4,000 to around $2,000.

For example, billionaire venture capitalist and bitcoin advocate Tim Draper still believes that the leading cryptocurrency will reach $250,000 by the end of 2022. “I’m either going to be really right or really wrong I’m pretty sure that it’s going in that direction,” Draper stated.

Bloomberg has predicted that Bitcoin price could hit the $100,000 mark already by the end of 2021. However, the report continues saying that, following the surge, the price will drop to as low as $20,000.

“About $40,000 may be the Bitcoin cap a while within what we see as a resting crypto-asset bull market. No. 2 Ethereum is rapidly moving toward No. 1 market-cap status and has been a top driver of the Bloomberg Galaxy Crypto Index in 2021. Bitcoin is more likely to resume appreciating toward $100,000 resistance rather than sustaining below $20,000,” according to the report.

Employing trading strategies

As trading activities pick up speed again, crypto traders have to employ a number of strategies to safeguard their funds. Trading, including crypto, stocks, and real-life assets, is a game of wits and strategies. The crypto market is a volatile market such that losing funds is likely for a newbie. Strategies like Dollar Cost Averaging (DCA), Scalping, Swing trading come in handy for traders, while trading. 

Sometimes, the likelihood of these strategies yielding profitable results — especially during the market fluctuation in June — is low. Notwithstanding, they have proven to be effective, rather than a headlong and one-way approach to the market.

Traders also take advantage of trading tools such as the stop loss and take profit that can be found on the most centralized exchanges.

A stop loss order is placed when to buy or sell a specific coin when it reaches a specific price. It is geared to limit the losses when a trader believes that the prices may move against their trade. Thus, it is expected to help traders limit their risk on a trade. 

A take profit order is an order designed to automatically close a trade at a certain rate when the market rises. It is done to ensure that the investor’s profit is realized.

But using these tools involves research and analysis, which may be quite time-consuming. Analyzing the fundamentals and technical details of a crypto asset requires that traders commit efforts. The downside to this is that the analysis could turn out wrong.

Automated Crypto Trading and Trading Bots 

In light of this, it’s a common practice for traders to resort to automated trading, which is otherwise known as trading bots. Automated trading involves the use of bots that ease the trading process.

Automated crypto trading can also be a good option for beginners, as they automagically buy and sell coins at the right time, with the goal of generating a profit. Also, investors often are not able to react quickly enough to the price changes to achieve the optimal trades, as it’s physically impossible to monitor the crypto market round-the-clock.

With trading bots, investors only have to place buy or sell orders and wait for their orders to get filled. Essentially, trading bots are designed to maximize traders' funds with little or no involvement from them.

What they can do includes round-the-clock trading, absence of human factor, instantaneous automatic execution of operations, lack of emotion, ability to test trading ideas, and diversification and risk-sharing.

However, it’s necessary to remember that one should always be careful when providing someone with the API keys of their exchanges. 

Some trading bot developers have established themselves as reputable crypto trading bots, as they offer automated trading services on an array of leading crypto exchanges, including Kraken, Bitfinex, or Binance.

Automated crypto trading also provides arbitrage tools and crypto signals for investors, giving them the opportunity to adopt an investment strategy that suits them best.