Are Trading Bots Running the Crypto Markets?
Trading bots are computer programs that execute trades automatically. They work 24/7, reacting to market changes in real time—much faster than a human can. Bots help by spotting price differences and executing arbitrage opportunities across different exchanges. However, their fast-paced activity can also lead to sudden market moves, sometimes causing flash crashes or unexpected volatility.
Recent studies show that algorithmic trading can account for a significant portion of crypto market volume. While many traders use bots to improve efficiency and manage risk, overreliance on automation might reduce human oversight. This can sometimes lead to market instability during periods of extreme volatility. Some experts argue that bots create more efficient markets by quickly correcting price discrepancies, but others warn that their dominant presence could amplify market swings. Overall, finding the right balance between automated trading and human judgment is crucial for a stable trading environment.