Crypto in 2023 is an overwhelmingly massive market, amassing a net value of 1.19 trillion dollars.
This is the reality when there are 25k+ cryptos in the market, a metric that is expected to grow in upcoming years. A major factor behind this unforeseen crypto boom took place because of its mainstream adoption.
Currently, more than 420 million people own cryptocurrencies, a number that has quadrupled since January 2021. As happened with the stock market, more people started to learn about crypto and businesses worldwide took notice of it.
That is why they started producing crypto trading bots, automated tools that assess market conditions, historical prices, and algorithms to fetch desirable trading results.
Such properties allow these bots to make calculated decisions without falling prey to biased or emotional trading. The market has grown since its introduction and is expected to garner a 1.9 billion dollar market valuation by 2024.
Although a large number of crypto trading bots are available in the market that make the job easier for traders, their ethical use is still a big question mark for many. Trading is a field that has been affiliated with research and objective decision-making for decades.
Renowned traders, such as Paul Tudor Jones and Jesse Livermore, agreed with the sentiment and promoted a methodical and dispassionate trading mechanism. However, the scenario has taken a massive turn since these traders dominated the market.
Now, algorithms have become capable of calculating thousands of scenarios. But does that make the use of crypto trading bots ethically correct?
Let’s take a look at the facts first. Trading bots are used to automate trades in a mechanical method. And while the bots can dig into factors, such as market history and trends, they also act on market sentiment.
There are occasions when the market takes a massive turn simply because it is driven by a subconsciously collective consciousness of traders who want to rally. At times, they even want to burn and crash the market while wasting time deciding to do so altogether.
What does that have to do with the bots? Since crypto trading bots operate on market sentiment, they will read the aggressiveness or cautiousness of the traders. But the unpredictability displayed by the masses can deter these decisions.
Moreover, the more traders start using the bots, the more inhumane the market will become. Currently, traders rely on human biases and high-volume traders to study the market. Since trading bots eliminate both these factors, they can impact the financial market as a whole.
The issues do not end here as to ensure a trading bot will yield positive results, it must be capable of executing lightning-fast trades without any error in the code. In addition, since traders implement risk mitigation and diversification strategies, one trading bot would not be useful in most scenarios.
In this case, they will have to invest in multiple bots, proving their integration to be counterproductive. What is worse is that for an industry that boasts of decentralization and security, cryptos are prone to immense security attacks and breaches.
In fact, the industry is witnessing a 192% year-to-year increase in attacks. These attacks have cost investors over 4 billion dollars in 2022 alone. Such endeavors elevate the risk of losing money to trading bots that can be breached due to security loopholes.
Even a minor bug in coding can wreck a trading bot, costing months of hard work. Let’s not forget the scenario of the iEarn Bot, a crypto scandal that shook the industry from its core. The AI-powered trading bot was promised to guarantee high returns to traders.
Promoted by experts like Gabriel Garais, the app suddenly denied users from withdrawing funds. The funds were blocked in Romania, affecting over 800k customers in the region.
The issues with trading bots in crypto do not end here. With 95% of crypto volume on multiple exchanges being suspect, trading bots can also lead to market manipulation.
Besides this, automated trading is likely to benefit institutional investors more than anything. These players can leverage automated trading better than retail users via colocation.
It is a service large firms offer to rent servers with direct connections to the trading system. It means that these traders enjoy the ability to post the fastest orders, leaving retail investors in the dust.
Traders on forums like Reddit and Quora have extensively debated the topic already. The bottom line of most arguments is this - crypto bots can be beneficial, but you cannot expect a bot to make you rich without laying the groundwork.
The statement stands true, seeing the uncertainty surrounding the unregulated nature of the crypto market. In an era where the SEC is bent on regulating crypto, many ventures and projects are failing to secure their audience.
Under such pretext, relying on bots that fail to understand the subtle complexities of trading can be tricky. This fact becomes crucial when understanding that 75% of the crypto trading bots are programmed to run based on technical analysis alone.
Their use also puts a huge question mark on the ethicality of traders. Since trading bots can be manipulated, attacked, or provide an unfair advantage to institutional users, their prevalence is still questionable in modern crypto trading.
Disclaimer:
This announcement is not directed at any investors or potential investors, and does not constitute an offer to sell — or a solicitation of an offer to buy — any securities, and may not be used or relied upon in evaluating the merits of any investment. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in this release are subject to change without notice. The contents in here should not be construed as or relied upon in any manner as investment, legal, tax, or other advice.
