The Power Of Automated Trading Systems In The World Of Cryptocurrencies
Oftentimes, participants in the crypto space ask themselves whether they should trade or HODL. What about a third option that is probably your best bet in times of market turmoil? Check out the advantages of automated trading in these scenarios, and how you can best use it to your advantage.
In May 2021, Bitcoin’s (BTC) value nosedived below the $40,000 mark. This was a significant decline of more than 20% compared to its all-time high price of $64,829 on April 14, 2021. Although the price of BTC tripled in 2020 and began 2021 with ample upward momentum, the meteoric rise cratered a few months later – with more than 50% of the total decline occurring within 20 minutes. This was an unprecedented drop in time and scope, even for the most seasoned crypto traders. It served as a stark reminder of the sheer volatility of the cryptocurrency market – despite rising volumes.
Regarding BTC, does this recent event mean that the Bitcoin train is derailing, at least for now? Well, since Bitcoin crossed the $60,000 mark in March 2021 for the first time, its gains started displaying signs of deceleration. This led to a loss of about $70 billion in market cap between May 16 and May 23 alone.
Many traders suffered enormous losses as prices dipped , making it difficult for them to manage their positions. Even though most traders understand that cryptocurrencies are high-risk, the recent plunge left them very little room to take action. Moreover, some exchanges reported glitches and downtime amidst heavy trading volumes, adding to the chaos. Owing to these hurdles, thousands of traders across the globe had no other option but to spectate the turmoil.
Let’s take a deeper look at the factors behind the latest crypto crash, how traders were impacted, and if there was a way to avoid losses.
What Caused The Bitcoin Slide?
It’s difficult to pinpoint the exact reason behind the latest crypto crash. However, recent data underline the fact that the world’s most popular cryptocurrency, BTC, has been on a downward spiral due to the possibility of increased government regulations, China’s latest bans on cryptocurrencies, and Elon Musk’s erratic approach towards the space.
On May 18, the Chinese Banking Association’s website stated that all financial institutions and payment organizations would be prohibited from supporting cryptocurrencies and providing any related services due to their highly volatile nature. As soon as the statement went viral, the market value of almost every cryptocurrency started tumbling. The government followed up with a subsequent ban on mining operations, adding to the turmoil.
Elon Musk, too, likely had a role in the recent Bitcoin slide. After his previous statement that was very bullish for BTC, Elon tweeted that Tesla will no longer accept the digital currency as a payment method. This was due to the environmental impact of mining, which led investors to very apparent panic trading.
As if these weren’t enough, there was a rumor making the rounds on Twitter claiming that the US Treasury Department was gearing up to fine several financial organizations for laundering money using cryptocurrencies. Many traders also believe that the crash was sparked by the implosion of massive amounts of leveraged trades placed by investors on less-regulated decentralized exchanges (DEXs).
Whatever triggered the initial wave of selling and the subsequent panic that came after that, one thing is clear. BTC is volatile and still has surprises that remind us of the very early days of the fledgling cryptocurrency.
All told, traders lost upwards of $10.1 billion on May 16 due to forced liquidations by several exchanges. More than 90% of the liquidated funds came from bullish trades placed on BTC and other cryptocurrencies like Ethereum. As the prices started dipping, many of these bets auto-liquidated, adding more downward thrust while sparking a vicious cycle of liquidations.
Was There A Solution For Traders To Avoid Some Or All Of Their Losses?
The short answer is yes. There is a robust solution for avoiding significant losses in the cryptocurrency markets and traditional markets as well. Many of these tumbles can be outright avoided by employing automated trading systems, commonly known as algorithmic trading. By combining the power of automated decision-making based with a conservative approach devoid of any emotion, it is possible to navigate the markets optimally while exiting trades on time.
As EndoTech CEO Anna Becker Ph.D. reminds us, “how many trades do you wish you had never placed?” This rhetorical question demonstrates that it isn’t just about the trades made, but the ones never opened, that also contribute to a more successful trading career overall.
In general, cryptocurrencies are highly volatile, with prices pumping and dumping in short time frames. To generate returns, traders and investors need to track all of the changes and make split-second decisions to buy, sell, or hold digital assets. We can all agree that it is next to impossible for humans to achieve alone.
With automated systems and pre-programmed crypto trading bots, it is possible to fully customize relevant actions by setting up preferred parameters for buying, selling, and holding multiple cryptocurrencies. Unlike humans, these bots process and analyze information at much higher speeds. They make decisions using statistics that aren’t driven by emotions. If you have suffered from the recent crypto crash and seek a more practical approach, algorithmic trading offers a promising solution.
The Proof Is In The Pudding – Why Automated Trading Is The Answer
At EndoTech, we don’t just preach about the effectiveness of automated trading algorithms. Our transparent track records show, in real-time, what is actually possible. During the latest BTC crash, our strategy outperformed not only long-only traders but also HODLers. In other words, buying and holding is considered one of the most careful and conservative routes one can take in the cryptocurrency field. However, in this recent crash, almost 50% of HODLers’ holdings were wiped out, while we managed to maximize our clients’ returns during this tumultuous period. Our AI-based Saas solution is fully automated, and based on AI which is a self-fuelling and cutting edge method of trading in today’s world.
EndoTech’s strategy was long on Bitcoin from the beginning of 2021. However, it exited the long position very close to the all-time high. This was based on pattern prediction in tandem with a conservative approach that aims to guard realized returns. The use of AI and automated SaaS for trading also takes emotions out of the equation. Greed, panic, and other everyday phenomena don’t play a role. This was perhaps the most striking benefit when looking at the May 2021 crypto crash.
Learn more about our range of unique algorithmic trading solutions. Powered by AI, they are designed to help you navigate volatile markets in the best possible way.