The role of automated trading in driving up bitcoin values.
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CoinFi's Tim Tam
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As of this writing, the total value of the cryptocurrency market was $440 billion, representing incredible growth over the course of 2018. Bitcoin, the leading cryptocurrency, has seen a year-to-date increase of 1,50% and a daily notional value of over $10 billion in trading. But how much of this buying and selling can be ascribed to actual humans vs computers?
It appears that automated trading may be responsible for a sizable portion of short-term investments. What's more, it's possible that automated trading is already openly distorting the market, driving up prices unfairly and leading human investors to pay too much for their trades.
Graph analytics and its growing influence_
Simply put,
what is a bot?
A bot is a program that makes purchases and sales in the market automatically, typically on a short-term basis. In the past, significant market disasters have been blamed on preprogrammed bots that purchase and sell automatically in response to predetermined triggers. The original generation of bots, which sold stocks automatically when they went below a specific price, was responsible for the infamous 1987 Black Friday Wall Street meltdown, in which equities lost more than 30 percent in one day.
Investing is hardly the only industry where bots are used now; they have reached near-ubiquity. Some robots, or high frequency traders, are actually welcomed in the equities market since they provide liquidity for regular buyers and sellers. However, not all bitcoin bots are made equal, and many are not meant to assist you.
Much more sophisticated bots than those that precipitated the 1987 stock market crisis found their way into the Bitcoin market almost immediately after it gained traction. They have spread to all cryptocurrency exchanges as programmers take advantage of the ripe conditions for financial gain presented by the industry's rapid growth, the influx of novice investors seeking to profit from it, and the lack of regulatory oversight.
For example, consider Neo. Neo, which is promoted as the Chinese equivalent of Ethereum, saw a huge influx of investment following Ethereum's 5,800 percent gain in 2017. In addition, Neo rapidly became fertile ground for a trading bot to operate and take advantage of naive and/or overconfident traders. By the 29th of November, anomalous signals from sophisticated crypto trading platforms showed that many bots were trading on Neo. Shortly after the initial indications were spotted, the price crashed due to the market's excessive volatility and the simultaneous trading of dozens of bots. In a matter of seconds, Neo's value dropped from $34 to $3.74 and then back up to $34. High-stakes investors almost instantly saw their investments evaporate. This kind of sudden collapse has occurred before, and it will happen again.
Cryptocurrency markets are vulnerable to manipulation by bots, who can artificially inflate prices. Because of their robotic trading habits, new investors in the cryptocurrency markets tend to pay too much for the coins they purchase. The "pump-and-dump" technique, made famous by Jordan Belfort in The Wolf of Wall Street, is still being successfully performed, this time by bots, in today's cryptocurrency markets. The goal of this plan is to "pump" the price of the cryptocurrency by means of a coordinated purchase of coins at low prices in order to lure in unsuspecting new investors. When human investors buy "the pump," automated trading systems simultaneously sell off the asset. Without fresh demand, the price of the coin plummets, leaving investors bewildered and worried about their holdings.
Regrettably, this is a common occurrence in the bitcoin markets. Business Insider reports that there is no shortage of strategies in which a group of dealers employ bots to purchase coins simultaneously in order to push up price. People hear about the coin, get carried away by the hype, and purchase some in the hopes of making a fast profit. What they have is far from ideal.
It's conceivable that more people may fall prey to pump-and-dump schemes as more "retail" investors flood the cryptocurrency market in recent weeks to cash in on the Bitcoin boom.
Without sophisticated analysis techniques, identifying the locations of bot activity can be incredibly challenging. In retrospect, their presence is more obvious. Look at yesterday's activity in Bitcoin trading on Coinbase:
Did you notice the recent precipitous price drops? It's obvious that bots are being used to trade and manipulate prices here. Looking at the trading signals right before each flash crash and comparing them to the times of the crashes makes it evident that these price declines do not represent human trading behavior. (The decreases aren't necessarily due to automated systems, though. As the majority of Coinbase's orders come from ordinary people, they are particularly susceptible to the market's current euphoria and the resulting fear of missing out (FOMO) among retail customers.
Price momentum and volume are two of the most telling signs of automated manipulation. Investors can prevent losses from pump-and-dump schemes or flash crashes by keeping an eye out for these signs.
Take a peek at this little example of a robot in operation:
While the developers of these bots typically keep their work under wraps, you can witness groups of people openly forming and working together to build bots if you do your research on Reddit or Telegram. Furthermore, there are some online communities where the practice of manipulating prices is discussed publicly. Contrary to popular belief, many people who excel in technological and programming fields also lack the actual financial know-how that could double, triple, or quadruple their investments.
As long as the cryptocurrency market is unregulated, automated trading will continue to be a part of it. Most investors are unaware of the widespread use of trading bots currently in operation. Both the algorithms and human investors will improve their skills over time. Because of this, it's conceivable that an arms race will ensue. As detection tools improve, programmers will attempt to circumvent them. When bots improve in sophistication, platforms will speed up their R&D efforts to counter them. Until government action to stabilize the market and eliminate predatory bots, time will tell who wins the struggle, and regulation appears to be on the horizon.
To gain insight into the cryptocurrency market, Timothy Tam cofounded CoinFi. He has worked as a hedge fund manager and as an equities trader at Goldman Sachs.
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Unique and customizable Bots pancakeswap sniper bot for your needs. Message us to discuss and plan the perfect Bot for you, a dedicated team will assist you and create the whole code and provide updates as you like.
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https://www.dexsnipebot.com/ The role of automated trading in driving up bitcoin values.
A powerful Crypto Sniping Bot in your Hands. Multiple Functions Your Strategy
Our Bots are equipped with the latest functions up to date to adapt to the market and provide you with the best experience ever. Over 65 functions to operate with to make your own strategy or just leave the Bot to do it automatically for you for the best result.
CoinFi's Tim Tam
Attend the online Low-Code/No-Code Summit on November 9 to learn how to use low-code/no-code tools to build apps that automate processes and increase efficiencies at your firm. Subscribe now!
As of this writing, the total value of the cryptocurrency market was $440 billion, representing incredible growth over the course of 2018. Bitcoin, the leading cryptocurrency, has seen a year-to-date increase of 1,50% and a daily notional value of over $10 billion in trading. But how much of this buying and selling can be ascribed to actual humans vs computers?
It appears that automated trading may be responsible for a sizable portion of short-term investments. What's more, it's possible that automated trading is already openly distorting the market, driving up prices unfairly and leading human investors to pay too much for their trades.
Graph analytics and its growing influence_
Simply put,
what is a bot?
A bot is a program that makes purchases and sales in the market automatically, typically on a short-term basis. In the past, significant market disasters have been blamed on preprogrammed bots that purchase and sell automatically in response to predetermined triggers. The original generation of bots, which sold stocks automatically when they went below a specific price, was responsible for the infamous 1987 Black Friday Wall Street meltdown, in which equities lost more than 30 percent in one day.
Investing is hardly the only industry where bots are used now; they have reached near-ubiquity. Some robots, or high frequency traders, are actually welcomed in the equities market since they provide liquidity for regular buyers and sellers. However, not all bitcoin bots are made equal, and many are not meant to assist you.
Much more sophisticated bots than those that precipitated the 1987 stock market crisis found their way into the Bitcoin market almost immediately after it gained traction. They have spread to all cryptocurrency exchanges as programmers take advantage of the ripe conditions for financial gain presented by the industry's rapid growth, the influx of novice investors seeking to profit from it, and the lack of regulatory oversight.
For example, consider Neo. Neo, which is promoted as the Chinese equivalent of Ethereum, saw a huge influx of investment following Ethereum's 5,800 percent gain in 2017. In addition, Neo rapidly became fertile ground for a trading bot to operate and take advantage of naive and/or overconfident traders. By the 29th of November, anomalous signals from sophisticated crypto trading platforms showed that many bots were trading on Neo. Shortly after the initial indications were spotted, the price crashed due to the market's excessive volatility and the simultaneous trading of dozens of bots. In a matter of seconds, Neo's value dropped from $34 to $3.74 and then back up to $34. High-stakes investors almost instantly saw their investments evaporate. This kind of sudden collapse has occurred before, and it will happen again.
Cryptocurrency markets are vulnerable to manipulation by bots, who can artificially inflate prices. Because of their robotic trading habits, new investors in the cryptocurrency markets tend to pay too much for the coins they purchase. The "pump-and-dump" technique, made famous by Jordan Belfort in The Wolf of Wall Street, is still being successfully performed, this time by bots, in today's cryptocurrency markets. The goal of this plan is to "pump" the price of the cryptocurrency by means of a coordinated purchase of coins at low prices in order to lure in unsuspecting new investors. When human investors buy "the pump," automated trading systems simultaneously sell off the asset. Without fresh demand, the price of the coin plummets, leaving investors bewildered and worried about their holdings.
Regrettably, this is a common occurrence in the bitcoin markets. Business Insider reports that there is no shortage of strategies in which a group of dealers employ bots to purchase coins simultaneously in order to push up price. People hear about the coin, get carried away by the hype, and purchase some in the hopes of making a fast profit. What they have is far from ideal.
It's conceivable that more people may fall prey to pump-and-dump schemes as more "retail" investors flood the cryptocurrency market in recent weeks to cash in on the Bitcoin boom.
Without sophisticated analysis techniques, identifying the locations of bot activity can be incredibly challenging. In retrospect, their presence is more obvious. Look at yesterday's activity in Bitcoin trading on Coinbase:
Did you notice the recent precipitous price drops? It's obvious that bots are being used to trade and manipulate prices here. Looking at the trading signals right before each flash crash and comparing them to the times of the crashes makes it evident that these price declines do not represent human trading behavior. (The decreases aren't necessarily due to automated systems, though. As the majority of Coinbase's orders come from ordinary people, they are particularly susceptible to the market's current euphoria and the resulting fear of missing out (FOMO) among retail customers.
Price momentum and volume are two of the most telling signs of automated manipulation. Investors can prevent losses from pump-and-dump schemes or flash crashes by keeping an eye out for these signs.
Take a peek at this little example of a robot in operation:
While the developers of these bots typically keep their work under wraps, you can witness groups of people openly forming and working together to build bots if you do your research on Reddit or Telegram. Furthermore, there are some online communities where the practice of manipulating prices is discussed publicly. Contrary to popular belief, many people who excel in technological and programming fields also lack the actual financial know-how that could double, triple, or quadruple their investments.
As long as the cryptocurrency market is unregulated, automated trading will continue to be a part of it. Most investors are unaware of the widespread use of trading bots currently in operation. Both the algorithms and human investors will improve their skills over time. Because of this, it's conceivable that an arms race will ensue. As detection tools improve, programmers will attempt to circumvent them. When bots improve in sophistication, platforms will speed up their R&D efforts to counter them. Until government action to stabilize the market and eliminate predatory bots, time will tell who wins the struggle, and regulation appears to be on the horizon.
To gain insight into the cryptocurrency market, Timothy Tam cofounded CoinFi. He has worked as a hedge fund manager and as an equities trader at Goldman Sachs.
Customize Your Bot
Unique and customizable Bots pancakeswap sniper bot for your needs. Message us to discuss and plan the perfect Bot for you, a dedicated team will assist you and create the whole code and provide updates as you like.
Contact Us: Telegram: Contact @DexSniper
Website: https://www.dexsnipebot.com/
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