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Could crypto algo trading benefit from regulations?

Cryptocurrency has completely changed the way people approach currency trading and market regulations in general. While the concept is still relatively new to some people it has become one of the most popular talking points for everyone involved in finance and technology. Most countries are on the journey towards creating a crypto friend environment and inviting innovation and financial technologies to their citizens. It can be quite tricky to come up with a regulation system that would allow the currencies that are based on anonymity, transparency, and decentralization since the regulations usually take away from these specific qualities. 

The demand for fast and frictionless, no-third party involvement is very strong nowadays and crypto trading has become extremely popular and many people are starting to look into it more seriously and focusing on that as their primary source of income. 

The one drawback that the crypto market has and that everyone can agree is causing a lot of the extra stress for those trading in crypto is that unlike the regular market crypto market never closes so those who want to keep control of their assets at all time also have to be tuned in to the market 24/7. It is just unrealistic to be constantly in tune with the market when you consider the volatility factor and how liquid the cryptocurrencies are. The changes in cryptomarket happen at an impressive speed so not only do you have to keep an eye on the market, the chances of swift change never really go down. 

Since the problem of keeping up with the market was so universal across the cryptocurrency consumer base, we started to see different bitcoin trade robots popping up here and there. They keep an eye on the market and your assets while you’re away or sleeping. As with all things that seem too good to be true, this one is no exception and comes with its drawbacks that we will explore in detail below. 

The additional expanse

Of course, technology like this won’t come with an inviting price and considering that more often than not, those who are just starting with crypto are the ones using these robots or in need of using these robots, it seems like a hefty investment even for those who have accumulated a small fortune from trading already. There are some bots that will cost you around $24,000

a year. This technology is mostly aimed at those who are new to the scene and confused and in need of some direction even if it is coming from the robot. If you are just starting out with bitcoin or any cryptocurrency and haven’t yet made any substantial gains it makes little sense to invest in something like that. 

It is true that the crypto market is far more unpredictable than the stock market and requires more attention, but mostly you can manage to get away with trading crypto while checking in during the day and won’t necessarily need to say no to sleeping completely to be successful on the trading platforms. You might think that opting for the cheaper robot will be a better choice but, honestly, the success of these robots is only dependant on the system that they operate on and the algorithms they use to make decisions so this is not something to skimp on. Bot technology can be a major relief for any Bitcoin billionaire, who can afford to spend the money just for avoiding major changes, but most of the newbies are actually searching for that drastic change. While one could also benefit from this commitment it is crucial to understand what you want out of this technology and what it can actually give you. If you’re looking for a guide that will just make sure nothing too dramatic happens with your assets than it might be worth investing in, but if a newcomer decides to put all his money towards this technology it might not be the best idea simply because this is not the magic technology that will ensure the increase of your assets if that was the case everyone would do it. Leaving it up to the robots, especially if it gets more common than already existing 7,000 bots operating the crypto market the future could look quite bland and uneventful since most of them probably operate by the same goal, even though some of them definitely do a better job than the others. While the fact that you can’t magically get rich by purchasing a trading robot is disheartening there are other challenges that come with this technology as well.

The topic of regulations on bots

When it comes to cryptocurrencies regulations are the evergreen topic. As mentioned above, regulations, at least the existing regulations can often come in conflict with the way cryptocurrencies operate. China, who is dead set on embracing blockchain technology, has been teasing the regulated cryptocurrency that will be issued by the People’s Bank of China and will likely be more comfortable for people to use since they will be working with a trusted government institution. But we haven’t seen the roll out just yet, because China postponed the whole process, which makes you wonder whether the process of meshing the two opposing concepts proved to be harder than imagined.

Bots, like most of the crypto world in general, are unregulated. Some experts even have gone to say that what bots are doing would be considered illegal and against the regulations of any other type of market. 

Exchanges that happen on cryptomarket are very vulnerable to manipulation, and bots can actually be one of the leading sources of manipulation in the cryptocurrency trade. While it seems like an odd conclusion to come to because Automated trading is used actually quite widely there is a difference. Tools like mechanical trading systems are widely used even on the most powerful and strong markets like the US Stock Exchange, where around 75% of trades are conducted in a mechanical manner. But the difference is that this particular market is monitored. In case the system or a company is caught in fraudulent activity, illicit behavior or in general, just raises suspicion about the way it operates the government and the regulatory bodies have the right to investigate and request further details from the trade using these tools. Not to mention “wash trading”, a practice that buys and sells orders being placed at the same time in order to distort the levels of activity on the market. Both can and are being used for bad influence and fake transactions and most of the moves they make end up being non-economic in nature. The idea behind the bot that trades for you is great but there are so many little details like these that still need extra work and commitment to make it actually valuable and successful. Some crypto newbies can often fall in the trap of trusting the undependable providers, those who disguise the state of one’s actual assets as having a higher level of liquidity and hen deceiving the investors. Since bots are mostly used by those that need guidance, the fact that dangers like these are very common for this technology just highlights how careful one should be when taking a step to invest in the bitcoin trading robot. Regulations could potentially improve the current status of these trading bots but considering how long the process will likely be, there is a need for a quicker solution as well.

Before the regulated crypto market that still maintains the defining qualities of the technology can become the reality, it is up to the users to know as much about the industry as possible to avoid making the decision that will hurt them instead of growing their assets.

The crypto bots are a prime example that something that seems to work universally might not be the right fit, even if you have access to the technology and are willing to splurge on it. Since there is no existing body that would provide the definitive guide to the market and all of its risks, it is largely up to industry professionals to spread the knowledge about the risks to avoid further damage the reputation of the technology when in fact there is a way to prevent misunderstanding,

Room for improvement

The topic of regulations can be very divisive for those involved with the cryptocurrency market but the need for such guidelines is becoming more and more necessary. The restrictions don’t necessarily have to affect those who trade but those providing technology like trading bots have to be held accountable for taking the responsibility for someone else assets and into disclosing all the ways that they could benefit or damage the person trusting them.

Cryptocurrency can stay easy and decentralized while the country apply necessary guidelines in order to take control of risky situations and to make sure that in case any illegal activity takes place there is a way for the balance to be restored and those who got into the risky situation because of the lack of knowledge of the industry can have the backup to save themselves trouble. Bots, in particular, can become a tool for “wash trading” illegal activity and in general, can become a big money waster that also contributes nothing to the owner.

There is the need for regulations around this technology that will make sure that users are not spending money on the faulty products that could potentially damage their finances or use the technology for criminal purposes which has happened far too many times in the crypto world for the government to not be considering the regulations or at least some sort of policy that put the power back in the users hands. 




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Konstantin Rabin

Konstantin Rabin

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18 Aug 2015



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