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Bitcoin trading bots – Are they worth it?

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Cryptocurrencies are the new 'in' thing at the moment. Since Bitcoin pioneered the space, we have seen hundreds of coins come and go. But it is 2017 that has seen the huge volatility and in most cases the massive rally in these crypto coins.

The growth we have seen in cryptos (often over 5000% increases) is the type that can make people millionaires overnight, and unsurprisingly, has attracted a large amount of people to the world of cryptocurrencies. Now, if there is money to be made on a market you can bet that brokers are sniffing around the area. This is certainly the case, with numerous brokers offering cryptocurrencies as CFDs (mind you, only the big ones; Bitcoin, Ethereum etc).

Bitcoin bots

Now that there is clearly a market for cryptocurrencies, we are starting to see trading robots (bots) crop up. Trading bots or algo trading or auto trading is not a new way to trade. Institutions have been doing it for years and it is now becoming more readily available to the masses.

Trading bots use algorithms that are programmed to take trades on behalf of the trader. They use various market actions to determine their entry and exit points, these include; price, time, orders and volume.

The idea is to take human emotions completely out of the equation (often thought as the downfall to nearly every failed trader).

Bitcoin bots – do they actually work?

Now, does letting a robot trade for you work? Yes, it does. Banks and other financial institutions have been using them for years, and you would imagine that they would stop using them if they didn't work.

The problem then lies in the quality of the algorithm. The financial markets are an ever-changing ecosystem and for trading robots to continuously be profitable they must keep up with changes in market sentiment. 

With that in mind it strikes me that trading robots can definitely be successful however it also makes sense for the user of the trading bot to be aware of market conditions. Even if they are not actively taking the trades, there are likely conditions that would not suit the bot and to avoid them is probably advisable.

Cryptocurrencies still in the honeymoon phase

An example is cryptocurrencies in general. Bitcoin was released just after the financial crash in 2008. That means that all cryptocurrencies have not experienced a bear market or market instability. Furthermore, the trading bots have only been trading on cryptocurrencies as they have been going up, we don't know how they will function in more testing market conditions.

Why Bitcoin bots now?

Now we're seeing trading bots veering over to cryptocurrencies, the majority are currently only offering Bitcoin. Because Bitcoin is the crypto leader (in nearly all aspects) and currently offers the most liquidity. Liquidity is appealing to both traders and brokers because there is a higher chance they can enter and exit the market at the price they intend.

The crypto market also offers trading bots zero transaction fees and because the market is new, its fragmented, which gives arbitrage trading opportunities.

The first Bitcoin bots were cast in a bad light because of Mt. Gox's infamous 'Willy' bot, who was accused of pushing up the price of Bitcoin up faster than a natural bull market. However, this was back when Bitcoin was trading between $2-4. When you look at it now trading above $4,000, that accusation looks quite petty.

Back then (2013) people were using bots that were trading using arbitrage, now with the increased liquidity people are designing bots that trade using similar strategies to the FX market.

Which Bitcoin bot to choose

Now that trading bots are readily available to the public, there are various options you can use. You can have bots designed for you, you can design your own bot and you can pay someone else to use their bot. 

So, which one is the best to use? Are they worth it? How much do they cost? These are all the types of questions we will look to answer in the next section. I'll take a few crypto trading bots and see what we make of them!

Gunbot

Gunbot was founded in 2016 and uses three exchanges to trade on; Poloniex, Bittrex and Kraken.

It has four pre-coded strategies that can used; BB (Bollinger bands), 1000trades, Ping Pong and Step Gain. You have the option to edit the strategies, but if you are new to trading it is advisable to leave the settings alone until you have a better understanding of how they work. 

There are however, two settings you must choose; first, are how much you want to trade, so the size of your trades (max balance to trade). And second, how many cryptocurrencies you want to trade.

Gunbot costs

As I mentioned Gunbot can be used on three exchanges, therefore giving three slightly different exchange prices. For each exchange, you require a license to use Gunbot. Each license costs 0.10 Bitcoins (BTC), which is quite expensive given the current price of Bitcoin. However, the license is for life, unlike other crypto bots that work on a rolling payment. This makes it the cheapest Bitcoin bot on this list.

Gunbot costs

Gunbot returns

The real question everyone wants to know is 'how much am I going to make?' Unfortunately, you are going to get the same answer for every bitcoin bot below. We don't know yet.

As crypto trading bots are new, they can't offer a track record of results and even if they could, the phrase 'previous results are not indicative of future performance' will constantly be used. 

The creator of Gunbot 'assures' that the bollinger band strategy generates around 1% a day, which is 365% a year! That is an incredible return, but how realistic is it? If it's true then sign me up.

Until we see performance results I will always be sceptical of returns that high.

Haasbot

Founded in 2014 by Stephan de Haas, Haasbot is one of the older bots on the market, which is a positive as it suggests the company and product has longevity (and that the software offers goods returns).

Haasbot basically offers a platform that has three trading bots; arbitrage bot, order bot and trade bot. Its platform is user-friendly and transparent, allowing you to adapt the trading bot as you see fit.

You can use the bots on all major crypto exchanges and over 500 cryptocurrencies, which gives the arbitrage bot plenty of room to work.

If you check out Haasbots website and then in turn platform, you will notice lots of detailed guides about the features offered, as well as a vast amount of technical indicators used (all very transparent and looks above board).

Haasbot costs

Haasbot is considerably more expensive than Gunbot and Cryptotrader. It offers three variations of its license; beginner, simple and advanced, which range between 0.06 BTC to 0.17 BTC for a 3-month period. 

Haasbot costs

Haasbot returns

We cannot avoid the question again. What kind of returns? And the answer is the same, we don't know.

What we do know is that Haasbot is a very down-to-earth approach of automatic trading. They do not make any bold claims regarding the returns they can make. What I do like about Haasbot is that they have been around for over three years. For a company to be running for that time, they need to be making money to pay their staff. Therefore, users are purchasing the trading bot licenses and must be making profit. 

As Haasbot has been around longer, we can read other users reviews {https://bitcointalk.org/index.php?topic=211979.0} of the bot and platforms. Unsurprisingly, there is a mixture of positive reviews and grievances.

Cryptotrader

Cryptotrader is an algorithmic trading platform for Bitcoin and other cryptocurrencies. It uses a cloud based solution where no downloads or installations are needed, meaning as long as your internet connection is good, there is no extra stress on your computer.

The platform offers plenty of pre-coded strategies to choose from, or if you have some basic programming experience you can create your own strategies.

Cryptotrader simply takes trades on your behalf. They access your, already open, account using API keys through the exchange and cannot withdraw funds.

Cryptotrader costs

Cryptotrader is the middle ground product in our list, cheaper than Haasbot and more expensive than Gunbot. It ranges from 0.003 BTC to 0.048 BTC per month depending on the subscription package you choose. Below you can see the different plans and what they offer.

Cryptotrader costs

Cryptotrader returns

Again, we do not know what kind of returns cryptotrader can offer. But reading feedback regarding the platform and software, in general it receives positive feedback. 

One of the problems when trying to put your finger on how much you can make using cryptotrader is that they offer so many strategies and charge you for each one. Therefore, each strategy will have its own set of results.

As a beginner, where do you start when trying to decide which strategy to use? Do you use the cheapest? the most expensive? You basically must take someone else’s word when deciding. The more adept traders, who are more accustomed to the financial markets will have a better idea about which strategies to use and why.

Cryptotrader strategy review

Coinstaker have conducted a transparent review of the 'Johnny Got his Gun' strategy using a monthly trial. This was a positive review as they came out with a 10% increase on their portfolio.

They then tested the 'Blade Runner' strategy and found that its claims were untrue and after repeated complaints that the bot does not work as represented, it is still given a 100% popularity rating. Suggesting that some people are pushing this product despite negative feedback. Approach with caution!

Cryptotrader therefore throws up a bit of a conundrum. How to find the best strategies in their long list? You don't want to pay for each one to find out whether it works or not, 1 – because it’s a long process and 2 – because it could end up being expensive. I would go with strategies with positive reviews and start small!

 

Disclaimer: I am not a qualified financial planner and this is just my view!

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