Crypto Bot Development – A Complete Guide

If you are wondering how to make a crypto trading bot, then you have come to the right place. In this guide, we cover everything there is to know about a crypto bot.

In the last couple of years, the use of cryptocurrencies has been authorized by several nations. Instead of fading out, crypto is being gradually accepted as an alternative form of currency. The features offered by blockchain technology make cryptocurrencies secure. 

This, paired with their volatility, has resulted in people trading crypto daily. Before we learn how to build a crypto bot, let us discuss why crypto trading is getting so popular.

Why is crypto trading gaining traction?

Cryptocurrencies are volatile. In a matter of minutes, cryptocurrencies can jump double digits. Their dynamic nature has garnered the interest of both short and long-term investors from all over the world.

People who are involved in daily trading are sometimes able to profit enormously. Since cryptocurrencies sometimes change within a fraction of seconds, we humans have started using crypto trading bots to automate the process.

Coinbase added 100,000 users in just 24 hours in August 2019. Share on X

What exactly is a crypto trading bot, and how do crypto bots work?

If you are unfamiliar with cryptocurrency trading, you might have a question: What are trading bots? In layman terms, they are a set of programs that help you buy or sell cryptocurrencies according to your preferences. Here are some ways crypto bots can help you record more profits:

• Crypto bots can help with portfolio management
• Set profit and loss margins
• Analyze and interpret market statistics
• Calculate potential market risk
• Buy and sell cryptocurrency assets

Also Read: How to create a cryptocurrency?

Various cryptocurrency bot strategies

Not every crypto bot is the same. Although there are several types of crypto trading bots available on the internet, here are the most popular crypto bot trading strategies:

1. Trend trading

These crypto trading bots are the simplest of the lot. These bots directly respond to any changes in the market. Trend trading bots do not make use of any complex algorithms such as predictive analysis. It is useful when you want to implement stop-loss or take-profit to prevent losses or gain sweet profits.

2. Arbitrage bots

This model compares the difference in prices between various crypto exchanges in the world. Since every exchange has a slightly different crypto price, the arbitrage model makes use of the exploit. If you want to know how to build a crypto arbitrage bot, read on. 

For example, if we compare South Korea and US-based crypto exchanges, we can see that South Korean exchanges offer significantly higher prices than their US counterparts. One can gain sizable profits by exploiting the price difference.

3. Coin lending bots

If you want to loan your crypto assets at certain interest rates with limited risk, coin lending bots can help you. They automate the entire process and help you record profits.

4. Market making bots

This bitcoin trading bot algorithm lets you buy and sell cryptocurrency in high volumes. The profit you get is from the difference between the buying and the selling price. If you want to trade high volumes, a cryptocurrency market making bot is your only friend.

Also Read: How to create a crypto wallet app?

Advantages of using a crypto bot

Why use a crypto bot in the first place, you might ask. The answer to the question lies in the stock market.

According to several reports, more than 80% of the trading done on traditional stock markets such as Wall Street is done via algorithm-based automated programs, a.k.a. bots. Share on X

Here are some advantages trading bots offer over their human counterparts:

1. Preset goals

It is said that more than half of the investors lose profits due to a combination of factors, most of which include emotions and decisions made based on emotions. Crypto bots can help you set goals, thus eliminating human interaction.

This systematic approach will help you maximize profits since these bots will automatically execute actions once the goal is met.

2. Faster than humans

The cryptocurrency market is volatile. A cryptocurrency might shoot up by 25% in a matter of minutes and come crashing the minute after. Users might miss on those profits if they are doing it manually since it takes some time. 

This is where trading crypto bots help the most. Once you start using trading bots to book profits, you will rarely miss out on profits. It is the reason why many people on Wall Street have resorted to using crypto bots for daily trading.

3. Back testing

If you use bots, you can perform paper trading and backtesting and make use of historical data to check if a pricing model or strategy is profitable or not. It doesn’t matter if you are a veteran or a beginner, everyone has something to gain from these simulators. When paired with backtesting, Prediction can help traders understand if the approach you want to use will help you book handsome profits.

4. Confined to predetermined trading rules

Panic is another reason why many people in the stock market lose money. For example, if the crypto you invest in crashes, you might panic and sell it without a second thought. Bots are immune to such rash decisions made by us humans. 

If you pre-define rules for selling and buying, then bots will help you in the long term. It is beneficial in volatile markets like crypto trading.

Why using an open-source crypto bot a bad idea?

You can also develop a customized crypto bot by downloading and building on an open-source bot. The installation is relatively easy and requires little to no technical knowledge. You can probably make yourself a crypto bot alone, but it isn’t worth the risk.

You will need to develop features and the bot itself, which will prove to be quite tedious in the long run. Moreover, if you encounter any security issues or any bug fixes, you will need to hire a programmer to fix them for you. 

Moreover, since the bot is already built, you will find it harder to build unique features. All-in-all, while it might sound plausible, creating and using an existing open-source bot can prove to be painful in the long run.

Having said that, Gello and Zenbot are two examples of excellent open-sourced crypto trading bots.

Tech Stack: Crypto trading bot

How to build a crypto trading bot

Now that we are familiar with crypto bots and how they work, let’s write a cryptocurrency bot. Follow the steps below to build ar ting bot that suits your needs:

1. Decide the language you are going to use

Even though there are several programming languages to choose from, we recommend you choose commonly used languages. The ideal candidates include Perl, C, and Javascript. The advantages these languages offer will make things easier for you and developers both.

2. List all the exchanges you want your bot to work with

This is one of the essential things when deciding how to code a trading bot. List down all possible exchanges you want your bot to work with. Doing this will make it clear to the developers what services you will use.

3. Create accounts on the listed exchanges

The next logical step will be creating accounts on all of the crypto exchanges your trading bot will access. Sign up with all exchanges you will use and make use of their APIs. Some common crypto exchanges include Kraken, Coinbase, Bittrex, Poloniex, and CEX.IO.

While some services allow you to trade on their platform anonymously, others require you to set up an account and get approved before you can make any transactions.

4. Pick the type of crypto trading bot you want to make use of 

Before you develop a crypto bot, choose the type of bot trading strategy you will use. Just remember that a complex algorithm will require more time.

5. Determine the architecture of the crypto trading bot

The architecture will determine the success of your crypto bot. Make sure that the algorithm you are using for your bot has a solid foundation. Otherwise, you might lose some money. The process involves deciding what type of data you want your bot to work on. Some examples include historical trends, market analysis, and determining market inefficiencies.

6. Coding

Coding is undoubtedly the most crucial part of the process. Communicate with your development team and let them know your expectations and what technology you want to use. An experienced team of developers will help you with everything, right from the algorithmic complications to UI creation.

7. Testing

Once you are done with the coding part, make sure to test your bot before deploying it. The process involves two functions. 

Make sure that your bot works as intended and does not falter or encounter any bugs. Test if your trading bot can handle complex data. The first stage involves evaluating ‘overfitting’ and ‘risk vs. reward function.’

Fine-tune the performance of your cryptocurrency bot. Optimize your bot by adjusting the parameters according to your preferences.

8. Deployment process

The final stage of making a crypto bot is deployment. An excellent mobile app development company provides support for some time, even after the app is released. This allows the business to migrate smoothly. Sometimes, enterprises encounter an error or a bug after the app is launched.

The deployment process helps fix any errors or bugs that might have crept in during the testing phases. It also helps the company understand the product better so they won’t encounter issues when taking charge of the maintenance process.

Also read: How to build a cryptocurrency exchange website?

How can Idea Usher help you build the best cryptocurrency bot?

We at Idea Usher have a proven track record of creating high-quality applications. Our highly experienced team have blockchain experts who can help you create a crypto wallet app easily. To connect with us, drop a mail at [email protected] and get a free quote!

Competitors

Now that you know how to develop a crypto bot from scratch let us look at some of the best apps in the niche.

1. HaasBot

HaasBot, which also goes by the name HaasOnline, is a popular crypto trading bot. The service offers various features such as notifications, backtesting, paper trading, reporting, etc. It can also be used to develop and deploy more crypto bots. 

The extensive feature set makes it one of the best crypto bots out available right now. HaasOnline also allows users to develop their customized trading bots. You can use templates, scripts, and other tools. It also allows you to add exchanges you want to use. The on-premises deployment feature helps with privacy concerns the user might face. 

2. Cryptohopper

Another famous name in the list of crypto trading bots is cryptohopper. This trading bot lets you backtest your trading and even manages all your accounts.

Take complete control of your portfolio by managing all your stop-loss orders with support for all major exchanges. It is a fully customizable platform that enables the user to set stop loss or profit margins.

3. Shrimpy

Shrimpy is primarily a cryptocurrency trading platform. It supports all popular exchanges, including KuCoin, Coinbase Pro, Kucoin, Coinbase Pro, Gemini, Binance, etc.

It helps you automate your existing trading strategies by providing every tool you will ever need. Shrimpy calls itself the social trading platform of the crypto market. It has an influential presence on all social media platforms such as Reddit, Telegram, and Discord.

Frequently Asked Questions

Q. Which is the best crypto trading bot available right now? 

A. Honestly, there is no answer to the question. People have had success with various bots. But if you look at the crypto bot niche, Cryptohopper might be one of the best solutions available on the internet.

Q. What is an online crypto trading bot?

A. A crypto bot helps automate crypto trading. The user can modify crypto bot settings such as the price they want to sell their assets, and the bot will do the rest. Think of it as a personal trade advisor. The bot will automate whatever you tell it to.

Q. What are the stages of a crypto trading bot development process?

1. Choose the programming language
2. Select APIs
3. Set up infrastructure
4. Choose your trading strategy
5. Select architecture
6. Bring the developers onboard
7. Test your crypto bot
8. Live deployment