A trading bot: can it manipulate the cryptocurrency market?

A trading bot is a way of using technology to trade and buy cryptocurrencies on your behalf. Therefore, it is possible to conduct negotiations as with a real investor.

Can a computer program manipulate the crypto market? With the following Remitano analysis, we will give you the most satisfactory answer.

What you need to know about a trading bot

Trading bots or trading bots are created using software and each one will work to solve different needs. Working with trading bots for crypto signals will depend solely on the intentions of the programmers who support them. Let's explain it better:

Concept

As I said earlier, the entire activity of the trading bot is based on human will. That is, we form the strategy ourselves. We will then build it and integrate it into our automated trading tool. Of course, during the trading process, people will be able to optimize them to function smoothly like a real investor.

Depending on the creator's goal, each trading bot has a different purpose. In general, we will see that there are 5 popular types of trading bots on the market:

  • Arbitrage: This type of bot is used to trade the difference between exchanges. The idea is simple: buy coins at a lower price to sell them at a higher price and earn the difference.
  • Market Making: This is a form of bot that makes a difference by placing buy and sell orders at the same time.
  • Technical Trading: This is a type of bot that performs its trading behavior based on technical indicators.
  • Portfolio Automation – This bot will help you create and maintain any portfolio based on the criteria you set.

Automated Crypto Trading is a trading bot that helps you allocate and optimize your investments at the rate you find most profitable. It is not difficult for you
find one of the above types of bots on the market. They are available in free and paid versions. If you are going to find a suitable trading robot, make sure you thoroughly understand it. Otherwise, you can check out the 5 Most Effective Trading Bots 2020 article on the Remitano forum for more ideas on the matter.

Why are trading bots so popular?

If you search on Google, you will find many offers for trading bot services. In my opinion, this popularity is explained by three reasons:

First of all, online trading: the essence of a trading bot is to replace people in financial transactions. But all these operations take place on a digital platform. So you can sit at your desk, create software and use it anywhere in the world for free.

Second, low cost: In general, the cost of these automated trading tools is also not too high. Most of them can be paid monthly.

Thirdly, being programmed as a professional investor is probably the main reason why trading bots are becoming more and more popular. Any complex calculations can be integrated into these automated trading tools. In terms of sensitivity and high automation, it is much more than what people do so far.

The positive impact of trading bots on cryptocurrency trading

The main purpose of creating a trading bot is to support and replace the human part of the trading process. Thus, it brings the following positive effects:

First, 24/7 trading support: Since everything is pre-programmed, there will be no stopping points in the trading process with a trading bot. More precisely, money can be earned even while sleeping.

Second, it eliminates the emotional factor: it is difficult for investors, no matter how professional they are, to avoid emotional pitfalls in trading. But with a trading bot, everything is different.

Maintaining the mentality and not allowing yourself to fall victim to the effects of FOMO (Fear of Missing Out) is what every investor strives for. And, of course, this does not happen at all with a trading bot.

Thus, we see that the trading bot is an integral part of financial transactions in general and cryptocurrencies in particular. In a literal sense, the nature of the trading bot is not bad. In some cases, it even makes the transaction more efficient.

Can a trading bot manipulate the crypto market?

Before we get to the answer to that question, let's pause for a moment. We will conduct a tour of the stock market to get to know the community.

If you are a stock investor, you know about the "sudden crash" on May 6, 2010. In just four and a half minutes, the frenzied interaction of fully automated trading algorithms left the US market in a bad state. Shortly after, it suffered losses of around US$1 billion (~£768 billion) before the transaction was quickly suspended.
Read also: The best long-term crypto investments