Over the years people have been fascinated anything to deal with virtuality and when the currency became virtual in the real sense people saw how it was great way to go paperless and avoid all the hassles of intermediary in every transaction. This currency was known as the crypto currency and has picked immensely with many people accepting this mode of payment in shops and salaries.
As we talk about all this, the trading of this currency is not only being done by human hands but much of it is automated. Study has shown that most of the short-term holdings are held by the Trading bots. This could be a huge manipulating factor for an artificial crisis caused by inflating the prices in the market and making the investors to shell out more than the actual executed prices stated.
What a bot does
Trading bots do all the trading automatically whether it is either buying or selling. This is usually seen in the short-term market. Since they don’t run on emotions and go with the flow, there have been times when they have been responsible for market crashes. There are several examples when such things have taken place and they were just the beginning of the bot use now as the technology is advanced further, the bots are now capable of more and they can just manipulate any market to their favour.
Bots are used in all kinds of markets, though they were first used in the equities, they are now exposed to all the existing markets of the world right from stocks, currencies etc. the bots have been given a special name and referred to as high frequency traders. In the equities markets they haven’t disrupted much and they sometimes are just assisting the market by providing liquidity to the normal buyers and seller of equities. But in the crypto currency world this cannot be said there have many manipulative ventures by these robots which have debilitated the faith in the way crypto currency functions.
How the combo works
The cryptocurrency and bots are pair which fit hand in glove kind. But perhaps it is more possible in the case of crypto currencies as they have little regulation in place and traders find it easy to capitalise in certain situations such as an exploding market, or they come across inexperienced investors who are gullible etc. the fall of the market suddenly is known as flash crash and it is very likely to happen when bots come into play. These bots are so designed to manipulate prices and then make the market crash.
The bots can inflate or deflate the prices as they can be programmed to do so. The people who bet on such artificially created situations tend to lose big time and within a matter of seconds and it all seems so un real at first and it happens in front of your very eyes. They make the buyers to pay more while buying by inflating the prices which is described by the term pump and dump which is widely used in the stock market nomenclature.