- A crypto bot just reaped a massive 88x profit, fully automated.
- Making large profits in bear markets is difficult, so this bot turned small arbitrage opportunities into a $176k profit with just $2k in capital.
- The bot exploited arbitrage opportunities in 5-minute BTC charts where it launched as many as 100 trades within a single hour. This strategy continued for a period of 1 month.
- The bot was created using Bayesian Model, Edge Model, price Spreads, Stoikov Model, and Kelly Model.
- However, such high-frequency trades carry multiple risks and are very hard to repeat successfully.
Crypto Bot Reaps Massive Profit in Bear Markets
A cryptocurrency trading bot, also known as a crypto bot, has reaped a massive 88x profit, turning a mere $2000 into $176,000 within a month, only by exploiting price differences of Bitcoin in different markets.
The bot reportedly launched hundreds of trades in an hour, exploiting marginal differences in the price of Bitcoin in different markets. It is also known that the bot was seeing Bitcoin prices on a 5 min chart. It had a clear understanding of Bitcoin’s fair price at the market, possibly by using a reversed Black Scholes Model.
The bot was programmed for accuracy, which was visible in its principal design, also discussed below.
How was the Bot Designed?
The bot was designed through a workflow that consisted of four mathematical and AI models combined with one financial model.
- The Bayesian Model: This model ensures that the crypto bot does not blindly follow the market price. Rather, it builds its own estimate of what the correct price should be.
- Edge Model: It is used to see whether there is a real measurable difference in pricing, or it just seems different.
- Spreads: Generic spread strategy where the difference in pricing is exploited for the same asset in different markets.
- Stoikov Model: It is used to execute an arbitrage trade where the bot makes all the profit.
- Kelly Model: It applies capital to the trade in a mathematical way so that you don’t erase your entire capital if the trade goes wrong.
You can find the complete tweet from its creator here.
Discussing the Risks
Although the bot made a gigantic profit, the risks have always been super high on high-frequency charts. Risks arising from such charts are:
- Liquidity Risks
- Volatility Risks
- Inaccurate Price Discovery
Besides risks in hyperactive short-term timeframe charts, there are other risks as well, such as gas mis-pricings. One such mispricing has cost at least $49.97 million to a crypto trader.
Further Reading: How to Use AI Trading Bots
Disclaimer: BFM Times acts as a source of information for knowledge purposes and does not claim to be a financial advisor. Kindly consult your financial advisor before investing.
