Why algorithmic trading on cryptocurrencies is a great alternative to mining, especially for a newcomer
One of the reasons the idea of mining Bitcoin was so attractive, is that it showed promise as an alternative way to generate wealth.
In the best case scenario, you could simply keep your laptop running with some program on it and wake up to see a pile of money the next day. In the worst case, you spend some money buying big machines, let them run overnight and see a little extra cash the next day. If you could save money on maintenance, electricity and perhaps assembly, then even better!
But as the mining difficulty rose exponentially over the years (because everybody else did it!), the costs outweighed the benefits for the average enthusiast.
Clearly, every time it seemed easy to “mine” crypto, the profits got offset by the waves of new miners. As new miners joined in, difficulty increased and the payouts per hash decreased.
This meant, the amount of time, energy and money you spent buying, building and assembling your mining rigs saw diminishing returns.
Some would-be miners eventually saw an opportunity in the price of Bitcoin. If you were anything like me, you would also have thought at one point
“Surely spending all this money on buying Bitcoin rather than mining would be more profitable”
The recent rally in 2017 and the subsequent fall in price of Bitcoin in 2018 and early 2019 has shown that this cow, like the mining difficulty bomb, is done being milked. “HODLing” is no longer profitable, at least for the time being.
As of 2019, there’s another opportunity, which is price volatility.
Unlike HODLers, traders love price volatility!
Some of the best traders don’t even care which way the market is moving. They don’t care if the market is bullish or bearish. All they want to do, is capitalize on price volatility by the old adage, buy low and sell high.
The biggest challenge of trading crypto, is to be able to predict the price, both long and short term.
The second biggest challenge is to stick to your principles and simply trade without any emotion.
The vast amounts of indicators, charts and tools available in tradingview.com is great except, it’s easy to get overwhelmed by all the information thrown at you (especially if you are not a professional trader)
Although you can set tradingview to send you alerts every time a certain indicator has hit a value, it is still too much of a hassle to wake up in the middle of the night and initiate that trade just so you could stick to your trading strategy, notwithstanding the fact that there is only so much complexity of that strategy you can handle anyway.
Surely there are great bots out there, that would do this automated trading for you, but I personally stayed away from them because
- I didn’t have access to those bots’ source code (since they are proprietary)
- I may or may not agree with the said bot’s trading strategy
- Maybe there is no bot in the first place. I know the bitconnect debacle all too well, to trust in someone who claims to have a bot that guarantees profits.
That said, bots are a great way to automate your trading. However, there aren’t too many great bot-building tools out there, yet.
DISCLAIMER: I work for Mudrex. I have a vested interest in the success of Mudrex as a company. However, this post is more than just a promotion.
I can’t help but make everything beyond this point seem like a promotion or an advertisement, but bear with me.
Mudrex is the first of its kind algorithmic trading platform where users can create trading strategies using a drag and drop interface OR can simply rent one created by a professional trader.
Then, they can backtest those strategies against a plethora of assets. We support crypto in Binance, Bitmex, Deribit, OKEx, CoinbasePro and bybit.
We can also run those strategies live, with real crypto in your exchange accounts using API keys.
So, if you have an account on say, Binance , you can export API keys for trading into Mudrex and simply have it trade automatically for you.
This is the kind of strategy newbies typically build and run
(snapshot of actual UI)
This is the kind of strategy I personally built after several months of learning how to use it
(my attempt at re-creating the technical analysis summary in Tradingview)
After you backtest or run paper or live, you can carefully analyze the results on a page that looks somewhat like this
There is even an asset graph that tells you exactly where the buy or sell happened.
As you can see, in an ideal world with Mudrex, you can
- Build a strategy
- Run it
- Take a nap
- See profit
In a realistic world with Mudrex, it’s more like
- Build a strategy
- Run a backtest
- Tweak strategy some more
- Run another backtest
- Run a paper trade (imaginary trades with imaginary money running in real time)
- Finally, run a real trade
- Take responsibility for the outcome.
The cool thing that I saw while working at Mudrex, is that we do not have an ICO (so far). We, the team at Mudrex simply want you to log in and try it out. Right now, basic plan on Mudrex is free; but that might change soon.
A few quick references below:
In my next post, I’ll write about the value proposition of trading for the crypto-space and then compare it with that of HODLing or mining.