This has come to attention to the people of the industry that some crypto traders might be using artificial intelligence and bots to trade digital currencies such as bitcoin. Many crypto exchange services have Application Programming Interface (API) that makes it possible for people to trace patterns and predict the future of the market using algorithm trading.
People have been using algorithm trading since the computerization of trading in the 70s in the stock market. Algorithm trading utilizes complex mathematical formulas and human oversight to execute orders on the exchange. But now, machine learning has become much more nuanced, and many crypto-traders are taking benefit of it by minimizing risk and making more profitable decisions.
How does Algorithm trading works?
In recent years the use of algorithm trading has become widespread, softwares like 3comma, Autonio which is the first decentralized AI-powered trading bot. These softwares analyze the trends in the cryptocurrency market and indicate when to buy or sell and execute orders accordingly. Some AI and bot trading systems require intense information about coding to be able to use them. But as technology is growing, it is becoming more accessible to use bots and AI.
How does it affect the market?
Various factors influence the price of a cryptocurrency. Such as the mood of market weather people are in panic or fervor, or it could be a subtle reason like how much a particular coin has been in the news recently. But one of the vital factors that go unnoticed is the use of trading bots that fluctuates the market price of the cryptocurrency. People use bots to make a simultaneous purchase or sell on the various exchanges that create an impression of a specif mood of the market. And it influences the decision of real traders. Use of bots and AI in the crypto market has been rising from the last few years, and traders should be aware of sharp dips and hike to maintain long term strategy. According to many industry tech experts, bots and AI are here to stay, and traders should get used to them.