What could be more fraudulent than entrusting your money to an online program? We try to find out if it’s worth trusting bots and automated crypto trading, how to use cryptosystems and how to protect yourself from scams.
What is an Automated Cryptosystem?
An automated cryptosystem, or in other words, automated crypto trading, is a technique for selling, buying, and exchanging cryptocurrencies, that is performed according to already configured algorithms, schemes, and bundles.
If automated trading essentially means automating the market and passive income, i.e. technologies for setting up instantaneous collection and transmission of data on price changes, transactions without the involvement of banks, buying and selling digital currencies, not by manually calculating the optimal time, but using a multifunctional platform, then an automated crypto system is a trick that not only offers to buy or sell a crypto, but buys and sells itself. That is, you set the parameters, and the crypto works for you.
When automating trading strategies, the main goal is to increase profits by reducing the amount of time spent. In this case, passive income through automated crypto trading platform is the right way to save time on searching for new trading strategies and actively trading to be successful traders.
Is Automated Trading Profitable?
Automated crypto trading platform is a modernized advanced crypto trading bot. There are several types of crypto bots whose trading strategies differ in cost and functionality. The most popular among them are arbitrage or grid trading robots. Arbitrage crypto trading robots exploit the price difference between different exchanges, while automated grid trading focuses on a “buy low, sell high” strategy.
The List of the Best Crypto Trading Bots 2022
Pionex has the widest range of functional settings, so it has become the most recommended among traders because it is a rebalancing bot that positions itself as a crypto market. Some automated crypto platforms have other features, such as 3Commas’ hodl feature, which allows users to store and keep cryptocurrencies automatically. Within the crypto system, users can choose the cryptocurrency they want and a bot to help them do just that.
How Does an Automated Crypto Trading Work and What Does It Involve?
Virtual currencies or “cryptocurrencies” such as “Bitcoin” as the most popular option are becoming more and more relevant as they are increasingly used as a means of payment or investment. In principle, cryptocurrencies exist only in virtual space, meaning they are not physically printed or stamped. This means that they are subject to all modern digitization processes, which exist only for the management, storage and transmission of information and data.
The way automated crypto trading works is that you provide it with your data and have full access to it to determine the optimal times for transactions. Some of these systems even create accounts on exchanges themselves. Most of them simply confirm the money transfers themselves and decide how to turn the money, constantly monitoring the price fluctuations of currencies on the market every moment.
The crypto trading bot makes the process easier for you. The latest crypto bots work directly with the blockchain based on smart contracts (an offer agreement that’s automatically created according to a general template for a specific transaction). The ones that have proven themselves in practice work through your API (a part of the application programming interface, description of computer program interactions), which communicates with a cryptocurrency exchange through your account so that it can also open and close transactions with conditions predefined by you.
Automated cryptocurrency trading has many advantages over manual trading, including the fact that bots can operate continuously without pause. They are impartial, so they always stick to the plan and follow any new trend or market event as soon as it occurs. What else?
Types of Cryptosystems: Capabilities, Advantages And Disadvantages
In general, there are two types of cryptosystems: symmetric and asymmetric. A system is called symmetric if the same keys are used for encryption and decryption. In a symmetric cryptosystem, Mike and Barbara jointly agree on a key that is used for both encryption and decryption. The problem with this is that Mike and Barbara have to agree on which key to choose. Therefore, they meet or exchange the necessary information over a secure channel. A third party, say Monica, in our case an automated cryptosystem, should not get hold of the key information.
Otherwise, Monica could decrypt the encrypted text and read the secret message. And if Monica can do that, so can her friend Jessica – then your data is at risk:
- risk of a cyber attack,
- increasing amount of personal data theft,
- the rebalancing bot may turn into a martingale bot, i.e. increase rates when losses occur until all costs are covered, which may never happen.
Virtual currencies are not yet subject to payment regulations in most countries. So far, cryptocurrencies are neither money, nor a foreign currency, nor a commodity, and few countries classify them as securities. As a result, it is difficult for authorities to develop coherent regulation or even apply it within existing structures. Brokers and traders can use automated cryptosystems, which, as noted above, vary in cost and function and thus in advantages and disadvantages:
- Pionex has 16 free built-in trading bots, including a Grid Trading bot that helps you sell the highest cryptocurrencies and buy the cheapest ones, and an arbitrage bot that uses the future market power of the Binance brokerage system to make withdrawals every 8 hours.
- For example, NAGA has an unlimited demo account. Also available are features such as deposits via bank, debit and credit cards, as well as online methods (Skrill, SoFort, Neteller, Giropay, EPS, Ideal, p24 and crypto); up to 1,000x leveraged trading. However, you can start trading only after depositing at least $250.
- CryptoHopper can be used with 9 different cryptocurrency exchanges including Coinbase, OKEX, KuCoin, Binance, Kraken, Huobi and many more. However, the cost of the bot leaves much to be desired after the trial version.
- CoinRule has a free package with over 7000 trading strategies, but it does not support technical analysis, which means it has no indicators. CoinRule offers MACD, Bollinger Bands, RSI (Relative Strength Index) and other indicators. The cost ranges from $30/month for the hobby version and $60/month for the trader level to $450/month for the professional package.
- Most manual trading strategies are influenced by an emotional factor, including Dollar Cost Averaging (DCA), which means constantly approximating the average purchase price of a cryptocurrency to the current price of a financial instrument – anything but a balanced investment plan. Yes, unfortunately it is. Dollar cost averaging does not always work. But if you trade based on technical indicators anyway, you should use a bot to save time and place more precise buy and sell orders with the help of TradeSanta.
To sum up the general disadvantages of cryptocurrency trading bots:
High start-up costs
In addition to the time required to initially create an automated system, you’ll need a lot of energy and patience to learn new skills. And the cost of the bots, which averages about $100 per month, can eat up the entire arbitrage margin.
Ongoing and planned expenses
Hosting and virtual private server (VPS) costs must be paid regularly to keep the system running smoothly.
Lack of flexibility
Cryptocurrency trading bots are based on a pattern of customizable rules that not all platforms can adapt to. Individual bots cannot adapt to changing market conditions, and you need to use additional bots. This rigidity can lead to missed opportunities or bad trades.
An automated cryptocurrency trading bot can be affected by technical issues such as network outages or server reboots, power outages, and data transmission errors. Your orders may be placed at the wrong price and in a random quantity, which will naturally lead to losses.
Lack of information security
When giving bots access to personal data, you should always be aware of the risk of hacking attempts on your account or fraud attempts that the bot simply cannot detect during automated trading.
Advantages of Automated Crypto Trading Platforms
The cryptocurrency trading bot will save you months of time spent monitoring exchanges, but which could be used to develop new trading strategies and profit opportunities.
The Trading Bot does not make any calculation errors.
New market opportunities
The investor uses the trading bot to take advantage of the cryptocurrency market, whose trends change every second.
Innovations around the world never stop, and Trading Bot captures absolutely all fluctuations, which allows you to open and take advantage of every slightest arbitrage opportunity, to actively trade.
What is the Difference Between Trading Bots and Automated Cryptosystems?
Crypto trading bots are automated tools that help you trade and execute transactions based on some technical indicators. There are several different bots. Among them: spot futures arbitrage bot, copy trading bot, scalping bot, best trading platform selection bot, history testing bot, arbitrage bot and so on.
You can set up bots to execute trading orders on your behalf according to the specific specifications of the crypto trading bot. But you can also set up a whole system of bots to trade cryptocurrencies “from and to”. Here is the difference.
Reasons For Using an Automated System of Crypto Trading Bots
- Crypto trading bot eliminates the possibility of human error and increases the speed of trading.
- Automation allows bots to analyze the market in the fastest possible way and make the most profitable trade possible.
- With an automated system of crypto trading bots, you can not only learn but also earn by making passive income.
- All in all, you will save time.
How to Use an Automation of Cryptosystem?
Trading cryptocurrencies is not an easy task for a beginner. Thanks to the configured automation system, you can track the entire path of cryptocurrency turnover, find out all the tokens of crypto funds, which allows you to stay disciplined. At the very beginning, the trader may not even know which trading platform to use.
This is because it is the system of bots that makes automation integral and complete. Especially if you want to make a profit without wasting time on it. Traders make an initial investment and fill up the accounts of the maintenance system, and the automation takes care of the rest, including the withdrawal of funds.
To effectively use and automate crypto, you need to do the following:
- Choose a cryptosystem.
- Create a portfolio on a platform like “coinbase pro”.
- Fill out a portfolio, of course.
- Customize the system according to your trading strategy and preferences in security, trades, attitude to other traders, the trading base and in the choice of cryptocurrency.
- Use trading based on cryptography technology to trade cryptocurrency and earn profit.
Is Automated Crypto System Legal?
There is no illegal in using an automated crypto system, if there are no restrictions on crypto trading. In the traditional banking sector, automated crypto system usage is fairly widespread and well-regulated. Robots now carry out a sizable amount of exchange trades, and bitcoin trading is no different.
But it’s important to mention about some limitations. Automated crypto system can range from straightforward scams to those that employ dubious methods that might be considered immoral or illegal. Examples of this include pump-and-dump schemes and directing consumers to unregulated brokers, both of which run the danger of stealing your money without providing any goods or services. These automated crypto systems could be using forbidden methods.
When answering the question of which are the best systems for trading cryptocurrencies, whose strategies are not related to open Big Data and whose users are easy to handle considering their work scheme, it is definitely money for jam. If you choose untested platforms, you run the risk of becoming a victim of a money-making scheme.
But you should always remember: trading bots are profitable as long as you can set them up properly. You can take advantage of the volatility of cryptocurrency so that bots profit from even the smallest price changes. They allow you to effectively track the markets and stay on top of them. Automate and manage your trading strategy!
Updated on 01/30/2023: added information about legality of automated crypto systems