Bots to take over the crypto-market in 2019

The previous year, the crypto market has taken yet another drastic dive, with the total market capitalization (market cap) nearly plummeting below $100B. At the time of writing, the market has managed to recover just above $133B. As with Bitcoin (BTC), the alt market has followed suit, with most major altcoins experiencing record lows on the year as well. Ethereum, for instance, was recently trading around $82, a price it has not seen since early May 2017. However, of notable relevance, is discerning between the trading activity of real traders (user accounts) and trading bots, as we head into 2019.

Interestingly enough, the share of bots can account for a significant part of transactions for the quick purchase and sale of digital currency. Moreover, bots can easily manipulate the market, artificially inflating prices.

A robot (bot) is a programmed algorithm that buys/sells specific currency(cryptocurrency) when certain scenario triggers. They are devoid of emotions and responsible for many collapses in the market. The famous “Black Friday” of 1987, a catastrophic fall in securities prices by 30% in one day on the New York Stock Exchange, was caused by program trading — first generation bots that automatically sold stocks when they fell below a certain price.

Image result for high-frequency traders
High-Frequency Trading performed by a bot

Today, bots are not limited to the securities market. In the stock world, some bots (commonly known as high-frequency traders) are even welcomed, because they provide liquidity to regular buyers and sellers. However, not all bots are the same, in the world of cryptocurrencies, many of them are focused not at all on helping you.

A good example is the Neo cryptocurrency. With the increasing popularity of Ethereum in 2017, investors turned to Neo, which is served as the Chinese equivalent of Ethereum. During that year, Neo quickly became the target for bot developers, the operations of which seek to benefit from the activity of overly optimistic and inexperienced investors.

On November 29, extreme market volatility combined with trading using bots led to a price crash within a few minutes after the first signals were detected. Neo dropped from $ 34 to $ 3.74 for a few seconds before returning to $ 34 again. Investors have lost almost all of their investments, in the blink of an eye. Traders can see such collapses occur more often on the cryptomarket, not only with Neo but with other altcoins as well.

Jordan Belfort and Leonardo DiCaprio

In comparison, there are Pump and Dump bots. Anyone who has seen The Wolf of Wall Street movie is familiar with Jordan Belfort (played by Leonardo DiCaprio), a classic user of pump and dump scheme where brokers would drive up the price of stocks, and then Belfort would dump the large chunks he and his partners controlled, cashing out. Then the stock prices would collapse. Unfortunately, the movie is based on a true story which took place in the late 80s and eventually led to Mr. Belfort’s downfall, “rewarding” him with a 22-month custodial sentence for his scheming.
Same happens to Crypto-market. After investors buy a currency at a bargained price, bots drop assets with almost perfect coordination. Without new buyers entering the market, Coins quickly lose their value, and investors tear their hair, observing almost perfect emptiness in their wallets.

Future of Crypto market

Cryptocurrency markets are here to stay, and it’s likely the bots are as well — as long as the market remains unregulated. BUT! Take into account that the bots are evolving and in the future, it would be almost impossible to speculate on the cryptomarket without losing money against smart algorithms.

This is reminiscent of the arms race, and only you decide on which side you are. Are you with HyperQuant to stay in trend with crypto algorithms or are you on the loose side.

This is not investment or Financial Advice. Do your own Research.

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