Algorithms and bot-trading have taken over Wall Street and the cryptocurrency market with no sign of slowing down. Analysts say everyday traders should be terrified of the coming decade.
Everyone in the cryptocurrency industry complains of bots ‘manipulating’ prices, but this will likely end up being even more severe during the 2020s.
In the past decade, we’ve seen some wild swings in prices, both among regular assets and cryptocurrencies. It’s primarily been due to algorithmic robots, but their effect will only be stronger in the coming years. The end result will be that successfully trading the market will be even more difficult.
Trading Is About to Get a Lot Harder
Veteran trader and Sevens Report Research founder Tom Essaye recently told Yahoo Finance that this kind of “short-term volatility is something we all have to get more used to.” Traders will find that the herd mentality of algorithms, coupled with their wild swings, will price many out of participating in the market entirely.
Although Essaye was talking about regular markets, the cryptocurrency world is no exception: in fact, whatever increased volatility we can expect in the general market will likely be multiplied multifold in the cryptocurrency market.
The end result will be veteran traders in the cryptocurrency world and on Wall St. being priced out. Many traders will find it difficult to keep up, as humans simply can’t compete with these wild fluctuations, which are too precise to recreate manually.
An Automated Cryptocurrency Trading Market
Many algorithms that currently engage in trading often rely on scraping headlines to make short-term price assessments. A single headline can cause bots to go into a frenzy, with extreme price volatility to be expected. Much of this was seen during the ongoing China-U.S. trade talks.
It’s no secret that a similar logic applies to the cryptocurrency market. Headlines for projects tend to cause significant price movements, and we can expect these only to become more drastic. The net result is an automated market that may find itself struggling to attract actual traders. Sometimes, these bots can also cause cascading losses for everyone involved as well.
As a result, traders may find that the HODL strategy could be best—unless one has a cutting-edge trading bot that can keep up.