Cryptocurrency, as a financial asset, is very volatile in nature. We know the daily upheaval that rocks the prices of digital coins. This volatility is something that investors try to control to make more money; however, the limitation of time and efforts keep them from making optimal decisions every day.
And this is exactly where the benefits of cryptocurrency bots come into the picture. Cryptocurrency bots are automated software programs that do not require any human intervention to make various kinds of investment decisions. The focus of these bots is on the relevant facts and figures, which ultimately help them to make more logical decisions than human minds. There is no emotional component attached to the investment strategies adopted by cryptocurrency bots, which is a huge positive for planning the overall digital asset strategy.
Utility of Bots
The field of cryptocurrency bots is evolving rapidly, and we are witnessing several iterations of these automated tools to help investors fine-tune their investment strategy. With the ever-increasing complexity of currency trading, the addition of cryptocurrency bots has brought huge relief to investors in terms of managing their portfolios and deciding investment strategy. It can certainly make the life of an investor much easier by taking the load off from his/her shoulders. Cryptocurrency bots can perform several tasks, including the likes of making the investment, managing the portfolio, executing repetitive work, etc.
Types of Cryptocurrency Bots
There are several different types of cryptocurrency bots available in the market today. The difference lies in the parameters these bots use in order to perform various functions related to cryptocurrency investment and portfolio management strategies. Primarily, cryptocurrency bots can be segmented into three different categories:
- Trading Bots: This is the simplest kind of a cryptocurrency bot and trades within a single cryptocurrency exchange. Depending upon the market and the value of the digital coins, the trading bot makes a different kind of investment strategies and execute them as per conditions. It might not be very useful if you want to invest in a diverse portfolio spreading across cryptocurrency exchanges; however, it is quite efficient as the focus of the bot is only on a single cryptocurrency exchange.
- Arbitrage cryptocurrency bot: This is the category that dominates the cryptocurrency universe as of now and has found favors with most of the cryptocurrency investors. This bot figures the price difference of cryptocurrencies across different exchanges and makes trade by purchasing at a lower price and selling at a higher price.
In other words, the price discrepancy across different cryptocurrency exchanges becomes the basis for operation for this type of cryptocurrency bot. This strategy is quite successful and given the fact that it is impossible to have access to all the cryptocurrency exchanges manually, this bot can prove to be very useful in tracking the prices across exchanges and accordingly making investment strategy.
- Algorithmic trading bot: This specific type of cryptocurrency bot uses the historical data in order to predict price patterns for cryptocurrencies. The use of the past data helps the bot to understand the movement of cryptocurrency prices better, and accordingly, it makes investment strategies for trading for crypto games in various websites.
In addition, there are specifically some cryptocurrency bots that are programmed in a manner that they will execute a particular investment strategy according to the signal provided by the price or volume of the digital coins.
There is no doubt that cryptocurrency bots have been able to simplify the complex nature of cryptocurrency trading. Especially their usability in placing the orders and trading across cryptocurrency exchanges is very useful. These take away the bulk of repetitive tasks and thereby save a lot of time for investors. However, one must use cryptocurrency bot with due diligence and care. In sum, it is always recommended to have a solid conceptual knowledge about the cryptocurrency market before you start using bots for implementing various kinds of investment strategies.