Do you want to be a Bitcoin trader? But you are not that good at it? Well, maybe you can try a trading bot. A solution often sought out by people that don’t want to spend their time trading or just don’t seem to make a profit from it themselves.
Over the last year, we have tested out a few different trading bots, with different crypto trading pairs. With some of them still running and some of them not. In this blog, we will share our experience with it and some of the profits/losses we made. How to prevent getting scammed by one and the easiest way to get started with one.
Exchange trading bots
When we say exchange trading bot we talk about a free-to-use build-in trading bot within the exchange. We have seen this with the crypto exchange Kucoin. Were people can create exchange bots by just depositing some money onto the trading bot account and selecting the trading pair. This makes it super easy to start. The only thing you need is some crypto. Trading or technical experience is basically not required. Each bot gives you a bit of an estimate on the APY (Annual Percentage Yield) you will earn. But do note that this can change dramatically. And they do not always make a profit.
Using an exchange that offers this feature is super easy and for starters is definitely the easiest way to get started or to try it out a little bit to see whether or not you want to explore more other options in the future.
Making your own trading bot
If you have some trading and programming skills. Creating your own trading bot might be the thing that can give you a head start. This way you as the creator can stand out against the other trading bots. If you keep the bot to yourself (and it works well). On the other side if using a trading bot does not fit within your style you could decide to sell it and make a profit that way. This way you as a programmer take less risk and can give the opportunity to others that do not have your skills. However, always make sure you believe in your own product before selling it to others. You also would not want a bot that the creator does not trust.
Trading bots for beginners
As a beginner in the crypto space making your own trades might be a bit scary or difficult. Using TA (Technical Analysis) is a whole skill by itself and takes time to learn. For those people, crypto trading bots might help out. Especially the once like build into an exchange like Kucoin. Here you only have to deposit money and you can start trading (with a bot). But not all exchanges offer this option for now. So if you prefer to use another one. You will probably have to make use of an exchange’s API key. That way you can make use of a third-party trading bot. And give it access to your Binance, Coinbase, or any other exchange account.
Do make sure that when you do, you do not give the bot permission to withdraw your funds. Because this way a malicious bot could steal your funds.
Trading bot scams
Trading bot scams, one of the trickiest ones out there and sometimes hard to recognize when you are new to it. Let’s say you are looking for a trading bot to increase your portfolio’s return. And you end up on a website that claims that you can make 1000% APY if you just deposit with them. Well here are some red lights going off. The first one is that you should never give them control of your crypto fully to any third-party bot. They can just use an exchange APY to make the trades there so that you don’t have to give off your full control. Second, no one can realistically speaking give you a return of a 1000% on a trading bot. If anyone claims they can they probably are trying to scam you.
If you want to start using a trading bot please always make sure to do enough research on the party behind the bot. This also goes for crypto-wallets. This way you can prevent using a scam crypto wallet or scam trading bot.
Trading bot earnings
So far we have used some USDT/BTC, USDC/USDT, and several USDT/Altcoin pairs. And the profits have not been that great. To start with our USDT/BTC pair. We have seen these bots make good trades and horrible trades. Probably because the bot does not detect the social momentum in the industry. These pairs for us have been not to much profit, with some of them earning 15% APY and some of them -20% APY. This more or less shows us that on average the bots do not work that well. But if you can find the right one you can make a decent yield.
What we experienced as a positive with this trading pair, was that when the market dumped 40% our bot(s) would only lose 15% in USDT value. So in some way, the bot does make the loss softer when the market goes down.
On the pairs with USDT and Altcoins, we saw a big spread of profits and losses. This once again was so different for each bot. But what we have seen the most is that the bots with trading pairs where the Altcoins went up do better in general.
Stable coin trading bots
The USDT/USDC pair we ran does make a decent profit. It is also hard to really lose when both represent 1 dollar. We came ended up with a 7% APY. Which is quite decent and definitely beats the interest on a bank account. And just come a few percentages under the stable coin lending APY on platforms like NEXO and Blockfi (Blockfi went bankrupt in 2022) . Plus it is better than the saving rates you will receive on most exchanges and banks. Although it does not make much more APY it does give you a little bit of spread on the way you might make interest on your stable coins.
Are crypto trading bots profitable?
So do Bitcoin/crypto trading bots make good profits? Well, yes and no. It depends a lot on the bot and the trading pair. For us, it was definitely an interesting experience to use all these bots but for our personal portfolios, we will stop using them as we think we can receive a better APY by using different methods. We will only keep the stable coin trading bot running as it seems like a nice spread for our stable coins. And it also makes a decent profit, at least better than the bank.
If you are thinking about using a bot to make your APY. Do note that we do not give out financial advice and only you are responsible for your financial decisions. So if you make a win or a loss. Only you can claim the responsibility for both.
FAQ:
What is a trading bot?
A crypto trading bot is an automated trading system that swaps between different cryptocurrencies to make a profit. This is similar to how a human would do it only does a machine do the hard work in the background. Based on an algorithm that someone wrote for it.
Can you make money with a trading bot?
Yes, you can. But just like with trading crypto yourself, nothing is guaranteed. On top of the fact that not each one of them makes the same profit. Some of them even make you lose a lot of your money. So always make sure that you use a crypto trading bot that works and check often if it does not just make wrong trades and lose your money. Would be sad to lose your cash on that.
How to connect a trading bot to a crypto exchange?
You can connect your bot to a crypto exchange by using the exchanges API key. An API key gives it access to your account. This way it can trade 24/7 for you at a very rapid speed. Do make sure that it does not have the option to withdraw funds from your account. Just in case it gets hacked or you have used one that turns out to be a scam. This way they withdraw the funds to a wrongful address.
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