Back in 2018 a user wrote in and asked us “How risky is Bitcoin and if this currency is traded by a Robot, do you think it is still very risky?”
6 years later and in the wake of AI being rebadged as automoation, my answer remains the same, yes Bitcoin robo-trading is a scam for retail investors. I have absolutely no doubt that there are automated trading programs out there that successfully trade Bitcoin. But these will have been developed by quantitative analysts at hedge funds who protect their trading strategies with as much secrecy as possible.
If you’re actually interested in finding out more about how algorithmic cryptocurrency trading works, I suggest you read the excellent book Going Infinite by Michael Lewis about Sam Bankman-Fried, the founder of FTX. But we all know what happened there.
Bitcoin trading is very risky.
Cryptocurrency is very volatile because the major factor affecting it’s price is speculation. We saw this in cryptomania last year, where the price spiked significantly then dropped as a flurry of traders rushed in and then got stung…
- Further reading: Find out what drives crypto prices here…
Bitcoin, however, could be described as a slightly more stable cryptocurrency for traders as there are on exchange futures contracts provided by the CME. Which means that banks and institutions can trade and hedge positions. But as an unproven asset class with limited liquidity and providers, it will still be more volatile than other established currencies.
So, yes, Bitcoin trading is very risky and you should go into it with your eyes wide open and accept that you are taking massive risks and may lose all your money very quickly.
If you are thinking of trading Bitcoin, only go with a regulated Bitcoin broker and read our guide to avoiding crypto trading scams.
The second part of the question was about crypto robo trading.
Bitcoin Robotraders are pretty much all a 100% scam!
There is a huge amount of misleading marketing out there and the majority of it advertises high returns for doing nothing. This is of course a scam and should be avoided at all costs.
We’ve looked at scams on instagram here and dodgy crypto advertisements here.
There are lots of robo trading programs developed for Forex and Index trading through MT4 brokers, but to be honest, I’ve never seen one available to private traders that has generated returns in the long run, or even the medium term.
They are all based on highly liquid markets with tight spreads and are based on recognising charting patterns. However, the more volatile a market, the less effective they are. And as cryptocurreny is very volatile and has wide spreads, crypto robos are very ineffective (that is of course if they are not a complete scam to begin with)
You can also, read Flash Boys by Michael Lewis, it will give you an insight to exactly how complex automated trading is and highlights exactly how improbable successful crypto robo trading schemes are.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
You can contact Richard at richard@goodmoneyguide.com
