Building Your Own Crypto Trading Bot: The Right Investment In 2021

Building Your Own Crypto Trading Bot: The Right Investment In 2021.

The cryptocurrency market is highly volatile – assets lose and acquire value in split seconds. To make sure they make the most out of the value of cryptocurrencies, business owners use tracking tools that help respond to fluctuations. 

In January 2018, buy-and-hold investors lost over 23% of their portfolio value in the span of 15 hours after the price drop of Bitcoin.

That’s where crypto trading bots come in handy. These platforms help crypto investors spot fluctuations and manipulate assets to avoid financial losses. In this post, we will take a closer look at the benefits of building a crypto trading bot and technologies used to make one (spoiler: we think it’s a good idea to hire Python developers. 

What Are Crypto Trading Bots?

Crypto trading bots are tools that automatically buy and sell cryptocurrency at the right time (the right timing is discovered as a result of constant data processing and analysis). This software analyzes market risks, predicts and spots the early signs of price drops. 

Benefits of Crypto Trading Bots

A crypto trading bot is an AI-based equivalent of a crypto expert, designed to protect creators from making unreasonable decisions. Unlike humans, bots are available 24/7 and have a higher processing efficiency. 

Here are the main benefits of making a crypto trading bot:

• Equipped to process large data batches. The ability of a crypto trading bot to analyze and derive insights from terabytes of data is unmatched to the processing speed of a human brain. Thus, bot creators will be able to get a big-picture view of the entire crypto market in real time. 
• No human error. Bots are emotionless and cannot be swayed by hype or manipulated. Unlike humans, they make rational, cold-minded decisions, essential for successful investments. 
• Efficiency – crypto trading bots work on around-the-clock basis, allowing creators to eliminate monitoring downtime and always keep a careful eye on market dynamics. 

What do You Need to Develop a Crypto Bot?

The amount of time and money needed to roll out a crypto trading bot depends on the tool’s complexity – range of features, cross-platform availability, and other factors. In particular, here are 5 criteria that influence the cost of a crypto trading bot:

• Feature range. Typically, a crypto trading bot is designed for market tracking, andsing real-time change alerts, placing bids, and keeping transaction logs. However, larger-scale teams often throw custom features in – simulated trading environments (“sandbox”), strategizing, security encryption, and others. This added functionality increases the resource expenditure both in development and maintenance. 
• Accessibility – to design an easy-to-use trading bot for smartphones, team leaders need to invest in software development teams. As a result, a need to expand the development team and spend more time reviewing and testing the product becomes apparent. 
• Currency support – the more currencies a crypto trading bot supports, the more expensive it is to develop. 

On average a business owner needs to invest at least $5,000 to develop a crypto trading bot from start to finish. Depending on how high the python developers salary in the US is, the estimate can fluctuate both ways. 

How to Generate Profit With Crypto Bots?

Unfortunately, the truth behind crypto trading bots is that few are actually profitable. There’s a consensus in the financial community that open-source trading bots are not designed to be profitable (since no team would publish an innovation that allows other investors to make money for free). 

With paid platforms, the situation is slightly more complex but, essentially, the same. While these bots are easy to set up, according to reviews on Medium and Reddit, few bot users generated as much as 1% return from these tools. 

To that end, designing a custom crypto trading bot is the most viable alternative. With that in mind, blockchain experts recommend building bots that focus on spotting real-time capitalization opportunities rather than predicting future value fluctuations (a risky and unreliable approach). 

Python – Best Technology For Developing a Crypto Bot

While there’s no absolute best programming language for developing a trading bot, Python comes close. Here’s why it’s the right language for the backbone of a reliable crypto trading tool. 

#1. Wide range of tools for data processing and research

Since most crypto trading bots include backtesting – the process of checking a trade idea across historical market data. When designing a backtesting system, developers need to keep technical considerations like data granularity, order latency, and many others in mind. 

Since Python allows unit testing components and gives developers a high degree of flexibility, it’s a preferred language for designing research backtesting systems. Other than that, a range of libraries that facilitate data processing (NumPy/pandas) makes Python a better fit for the task than other object-oriented languages. 

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#2. A lot of learning materials

If you decide to build a crypto trading bot on your own instead of hiring a remote Python programmer, choosing Python as the programming language for the project is a smart decision from the learning curve standpoint. There are dozens of tutorials online that offer step-by-step walkthroughs of building algorithms and creating a graphic interface for the bot. 

Thus, it will be easier for people with little background in Python for developers to get the grip of key concepts. 

#3. Cross-industry and cross-platform accessibility

Python is one of the most flexible languages application-wise, fitting crypto projects extremely well. What’s more, tech team leaders can later readapt this code to design trading systems for traditional banking or conduct research in any other field. 

Cross-platform availability is another vote in favor of Python. Developers can run application code on Windows, Linux, and macOS without making a single edit. 

Considerations for using Python in crypto trading bot development

Two key considerations developers should keep in mind when considering Python as a part of their crypto bot stack are its documentation (anywhere near as robust as that of C++ or PHP) and code execution speed. Compared to compiled languages (like C++), Python is much slower in runtime. 

Conclusion

Designing a crypto trading bot is a smart way to back your financial decisions up with real-time market data and make the most value of crypto investments. Constant accessibility, high information processing speed, and impartiality are undeniable benefits of a crypto trading bot. 

As for the technologies involved, Python is a reliable choice for supporting a low-frequency crypto trading bot. It’s worth mentioning that, in the case of high-frequency trading, code execution speed might become a roadblock, in which case it’s better to settle for a compiled language.