In December 2024, the price of Bitcoin overstepped the $100,000 point following the designation of Paul Atkins as the director of the SEC (Securities and Exchange Commission), who feels optimistic regarding blockchain and crypto assets.
However, a positive attitude towards crypto development in the US and the rest of the world after January 2025 would be in notable contrast to the past.
Despite drawing much interest year by year, crypto throughout its short life remains susceptible to dramatic rises followed by equally immediate falls.
Just look at the 2022 crypto crisis when Bitcoin fell under $30k and top crypto billionaires, such as former FTX CEO Sam Bankman-Fried or Binance founder Changpeng Zhao, lost most of their capital.
Billionaires with the largest loss in net worth after cryptocurrency crash, Statista
Although investor confidence in blockchain currencies boosts again, it won’t get any easier to exist in the crypto world. The cryptocurrency market is fast-paced and operates 24/7, making it virtually impossible for traders to watch and manage price movements unaided.
What Is a Crypto Trading Bot in Blockchain?
A crypto trading bot, for example, a Bitcoin trading bot, is an automated blockchain software program made through cryptocurrency development services to independently execute cryptocurrency swaps on behalf of traders.
It applies predefined algorithms and strategies to examine market movements, generate trading signals, and execute buy or sell orders.
How Does an Automated Crypto Trading Bot Work?
In simple terms, a blockchain crypto bot solution carries out the same trading job as a human trader but with some peculiarities.
First, it gathers live information about the market: prices, trading volumes, and trends from cryptocurrency exchanges via APIs. Sometimes, when there is not enough current data, the algorithm turns to past market data to predict future price movements and identify probable options for earnings.
When the blockchain bot has all the details needed, it starts examining them using preprogrammed instructions or guidelines created by traders. This procedure helps the bot figure out whether it’s the right time to buy or sell a cryptocurrency.
If it decides it’s a promising opportunity, it independently places the necessary buy or sell order on the exchange.
A scheme portraying how a trading bot solution works
It turns out that the main strategy and behavior of the bot when performing on the exchange is set by people. However, the strength of the automated software is that it completes all actions much faster than a human trader and, most importantly, impartially.
The blockchain bot also includes tools to govern risk, such as setting a maximum amount of loss (stop-loss) or securing profits when a selected target is reached (take-profit).
Trading robots also work unceasingly, without any breaks. They constantly watch the crypto trading sphere, make decisions, and trade on an investor’s behalf.
At the same time, you can monitor how it’s doing and make adjustments to its strategy if needed. This combination of automation and oversight makes crypto assistants a powerful solution for traders.
Types of Trading Bots
Because there are many trading strategies, there are many types of algorithms to suit different investment styles, purposes, and market conditions. These variations allow traders to automate diverse approaches—arbitrage, market-making, trend following, scalping, etc.
Arbitrage Bots
Arbitrage bots use price disparities for the exact asset on different exchanges. For example, if Bitcoin is cheaper on Exchange A than Exchange B, the robot buys it on A and sells it on B for a profit.
Arbitrage scripts are highly efficient in finding minuscule and short-lived price gaps which can vanish in a split second and require immediate actions.
Market-Making Bots
Market-making robots investigate profits coming from the difference between buying and selling prices. They make simultaneous buy and sell orders at a price above or below the market price to pocket tiny profits in every transaction.
Such scripts would find more utility in low-liquidity marketplaces with wide spreads but require being constantly fine-tuned to prevent losses in highly volatile conditions.
Trend-Following Bots
These automated tools watch tendencies and execute orders on a market movement, in the upward or downward direction. When the market moves up, the blockchain bot executes buy orders and then initiates sell orders if it indicates a downward trend.
Trend-following systems rely on technical analysis indicators, such as moving averages or RSI, to recognize trends and generate signals.
Scalping Bots
Scalping blockchain scripts are programmed to make small-scale trades that appear with minor movements in prices. These systems act better in stable environments that move within tight ranges. While one trade may return an insignificant profit, the volume accumulates with time.
Portfolio Rebalancing Bots
Portfolio rebalancing robots preserve a certain allocation of assets in a trader’s portfolio. For example, if the target portfolio is 50% Bitcoin and 50% Ethereum, and via price changes, it has shifted to 55%-45%, then the bot will sell Bitcoin and buy Ethereum to fix the balance.
Signal-Based Bots
Signal-based algorithms enter into the trade on signals from third-party or external media or platforms. These signals may come from professional analysts, algorithmic systems, or social sentiment investigation, allowing even amateur traders to apply high-end techniques.
Essential Features of a Crypto Trading Bot
According to Coin Codex, the cryptocurrency market sees approximately $469B worth of trading volume in 24 hours (at the time of writing, January 10, 2025).
Crypto trading volume as of 10.01.2025, Coin Codex
Crypto trading volume is one of the most meaningful metrics for assessing the current cryptocurrency economy. To extract maximum profit from multiple trades, it is important that the bot is stuffed with diverse development features:
- Market Data Analyzer: The blockchain bot solution needs access to live data provided by different platforms concerning prices, trading volume, trends, and even news or events that may influence blockchain assets. With the information, it can make decisions about when to buy or sell.
- Signal Generator: The signal generator is the decision-making part of the bot. It examines market records to pinpoint investing opportunities regarding predefined strategies, including trends or particular patterns. In other words, when a signal (a buy or sell opportunity) is generated, the solution is ready to act.
- Risk Management Tools: Risk management features protect investments. They are divided into stop-loss mechanisms which means selling a crypto asset when it reaches a certain level of loss to limit the damage; and take-profit, which refers to a way to automatically sell a crypto asset at any given profit target so that any gains are always locked in.
- Execution Module: The execution module sends the orders for buying or selling to the exchange. This is one of the most important parts of the blockchain bot because the crypto economy moves fast and a split second can change everything regarding price.
- Backtesting Capabilities: It’s important to have a test before allowing any automated system to execute with real money. The backtesting feature lets traders simulate a trading strategy on historical data. That means you get a glimpse of how the script would perform if it were a real live run, thereby creating more confidence.
- Customizable Strategies: Some of the robots let you adjust or create your strategies, be it trading aggressiveness or technical indicators to use, such as RSI or moving averages.
- Multi-Exchange Support: The possibility of connecting the bot solution to several exchanges might be crucial for more advanced traders. Multi-exchange support will enable software to act simultaneously on multiple platforms and take advantage of different situations.
Why Every Crypto Trader Needs to Try Trading Bot Development Services
One of the greatest benefits of automated robot development services is that cryptocurrency exchanges are open 24/7 and require ongoing activity.
Of course, it’s hard for any trader to stay glued to the screen all day and night. Trading blockchain scripts, in turn, are always ready to act, even when you’re sleeping or busy with something else.
Automated software is also much faster and more accurate than humans. Crypto prices change quickly, and automated systems can make trades in seconds, making sure you don’t miss an opportunity. They buy or sell exactly when needed, saving you from making delays that could cost a fortune.
Another important advantage is that bots are emotion-free. When humans trade, fear or overexcitement can influence their decisions and lead to missteps—such as selling too early or holding on too long.
Trading blockchain assistants, however, don’t have emotions. They follow preset instructions, which means they trade logically and impartially, without being swayed by feelings.
Using a trading solution will also save you a considerable amount of time. If manually performed, it requires lots of action and concentration to investigate the market and conduct trades. Automated scripts can run multiple trades alone, monitor manifold cryptocurrencies, and apply different tactics.
Also, automated scripts can trade more frequently than humans, which again means they are able to take advantage of small price movements many times a day. Even small profits can add up over time, especially with the fast changes in crypto exchanges.
It is also easy for beginners to start with the help of a trading tool without any serious prior knowledge. Most of these algorithms come with simple interfaces and basic features to initiate the blockchain trading activity.
How to Create the Best Crypto Trading Bot: A Quick Walk Through the Development Process
While building crypto software might sound like a huge challenge, a little know-how is indeed enough to help you through blockchain bot development services and create a decent solution.
Explain What You Expect from Blockchain Development
Before you create a bot solution, it’s necessary to know what exactly you expect your software to do. Do you want a simple algorithm, like getting crypto when its price drops, or something more advanced, such as following trends using technical analysis?
Collect Necessary Records and Details
Now that you understand your ideal, you need to get data to teach a blockchain robot to make relevant decisions.
Most popular crypto exchanges have APIs that let you grab prices, volumes, and trends. You pull this data from these APIs and feed it to your algorithm so it will know exactly what is going on.
Create the Trading Algorithm
This is the most important part of blockchain development and you have two paths to create a bot. When your robot digests the data, it needs to be accurate to make buy or sell decisions.
If you feel adventurous and have sufficient technical understanding, you can create a solution yourself. Otherwise, you can turn to a crypto trading bot development company, such as SCAND, for help and partly or completely delegate the project.
Just remember—stick to unsophisticated development, especially if you’re just starting out. Don’t overcomplicate your undertaking until you get the hang of how automated software behaves.
Set Up Risk Surveillance
For risk mitigation and successful development outcomes, create some stop-loss functionality to help minimize losses, as well as take-profit orders so the bot solution can lock in the gains.
Backtest Before Going Live
Backtest before turning your software program loose with real money. It simply means pushing your system against past data to see how your tool acts.
Most platforms allow for access to historical data to create an idea of whether your algorithm can succeed or not. There is an option also to use backtesting apps to prove the trading strategy enforced within your system makes proper predictions.
Activate and Watch Your Bot Solution
When you’ve backtested and feel confident in your solution, it’s time to deploy it. Use small amounts of crypto initially, so that you can limit your risk while you see how it performs.
You need to survey its activity at least for the most part. The conditions on the exchange may change, and your tool may need some tweaks to remain applicable.
Secure Your Software
You don’t want anyone tampering with your trading solution or accessing your account. Make sure to protect your API keys and avoid hardcoding them in your blockchain bot code. A good development practice is to use environment variables or encrypted files for storage.
Also, create reliable safety mechanisms and enable Two-Factor Authentication (2FA) on your exchange account for added security. This makes sure your script can’t do anything without a second layer of protection.
Prerequisites for Crypto Trading Bot Development
Blockchain bot development mandates a bit of preparation. There are some fundamental skills, means, and setups you’ll need before moving on. Don’t worry, however, it’s not as overwhelming as it might appear.
Technical Skills Required
When plunging into blockchain development services, it is necessary to have some knowledge of programming.
Python will be the programming language that you should start with as it’s easy to use and has a lot of useful libraries to create a feature-rich solution, such as pandas for data manipulation, TA-Lib for technical analysis, and ccxt for exchange API integrations.
Also, you will need to learn about the basic use of investment strategies, trading concepts, market orders, stop-loss, indicators, moving averages (MA), RSI, and so on.
Tools and Frameworks for Blockchain Development
When plunging into crypto trading tool development, you will also require some tools and frameworks.
For improving your bot’s intelligence, use libraries from ‘pandas’ to ‘NumPy’. They are pretty good for data cleaning and data analysis.
In the matter of devising strategies, Backtrader is the ideal Python backtesting environment with historical data. QuantConnect, in turn, is a cloud solution with multi-language support.
To enable your algorithm to operate round-the-clock, the ideal hosting options are cloud providers, such as Google Cloud, AWS, or Microsoft Azure. However, if you’re trying to save costs for small setups, opt for DigitalOcean or Linode VPS providers.
And of course, Git and GitHub are the necessary tools for version control so that you can create and manage your code, work with other developers, and watch the changes made in case you decide to alter something.
Setting Up Accounts on Cryptocurrency Exchanges
To use your crypto trading solution, you are required to create accounts on blockchain crypto exchanges. Start with selecting platforms that satisfy your criteria (e.g., an array of supported cryptos, API functionality, a trading volume, etc.).
When you are ready with the crypto exchange, register on the platform and complete the KYC process. Then, create the API keys that will allow your bot to access exchange data and execute trades.
It is best to carefully configure permissions, such as imposing restrictions on withdrawals for added safety.
Last but not least, read through the API documentation of the chosen blockchain exchange as it will assist with gathering the required information and carrying out automated trades.
Challenges and Risks of Automated Bot Development
Employing a blockchain bot solution in the cryptocurrency sphere can be reasonable as it automates trading activities. However, there are risks involved.
Market volatility is a primary concern within the blockchain-based environment. A computerized bot may prove to be profitable but if it is unable to cope with unexpected situations it is sure to incur losses.
Another hurdle when you create a bot is the robot’s backtesting which sometimes overfits strategies due to focusing too much on old data.
Security remains a problem year by year. As automated solutions depend on the use of API keys to trade on your behalf, mismanagement of those keys can expose them to hacking and put your money in danger.
Server downtimes, exchange outages, or even crashes that affect the API may interfere with your script’s trading capabilities and possibly cause you to lose trading prospects or execute a bad trade.
Also, blockchain bots lack the human instinct of judgment, they cannot respond for instance to breaking news and unforeseen events that a trader would, so you may sometimes have to intervene manually.
Finally, different countries and jurisdictions permit different forms of crypto trading. This way, you need to keep abreast of regulatory changes and go back to the development process to make necessary amendments.
Best Ways and Means to Create and Run a Trading Bot
No matter how wonderful it is, a blockchain bot solution is just a tool and it takes some effort to create it and keep it unassailable, adjustable, and maintained.
To begin with, secure your software system by encrypting API tokens, utilizing environment variables, and turning on two-factor authentication.
Also, don’t forget to perform regular upkeep of your bot to guarantee that it is always in its best form to adapt to market trends. You can always test your program in a paper trading mode to get all the tweaks in place before putting in real money.
There are other things that can be done. One of them is to use a combination of methods and tactics to prevent huge flops. This step will also help during different swirls in the blockchain-based economy.
Do not forget to determine how rationally the trading assistant functions and review its core parameters.
And last, with any new development involving investment laws or taxes, we suggest always being updated with the existing regulations so that your script does not get you in trouble.
Possible Directions and Tendencies in Crypto Trading Bot Development
With the assimilation of artificial intelligence and machine learning, it seems that the era of automated software tool development in the crypto trading space will soon approach a new phase.
The advancement of these developments will contribute to the betterment of the bots since they would be able to study the previous trades made in order to aid in foretelling future trends and improving self-directed strategies.
With the rise of DeFi, in turn, there are opportunities for robots to start interacting with decentralized exchanges and liquidity pools, all in search of arbitrage opportunities.
Customization is going to be a big trend too—future scripts will let you have more control over the strategy design and execution. Furthermore, advanced components, including multi-signature wallets and decentralized authentication, will be added to the system, greatly increasing the system’s safeness.
Proper risk management, predictive analytics, and even sentiment detection will create a more synchronized relationship with the blockchain economy, as well as the trader’s trading strategy.
Verdict: Is It Worth Turning to Crypto Bot Development?
Crypto trading algorithms are powerful tools that can help traders manipulate cryptocurrency trades more rationally, reasonably, and profitably. By understanding how they work and following a systematized approach to create and manage them, you can open new investment options.
FAQs
How much does crypto trading bot development cost?
Building a crypto trading bot can range in price depending on how complicated it is and the features you want. If you’re building it yourself, it could cost anywhere from a few hundred to a few thousand dollars. Using open-source bots or white-label options will be cheaper, with costs typically being a monthly subscription. If you go for a professional developer or managed service, expect to pay more—anywhere from a couple of hundred to a few thousand a year.
Can a beginner create a crypto trading bot?
Definitely! Even if you’re a beginner, you can create a simple trading script. You’ll need a basic understanding of software development and some fintech knowledge. Plenty of tutorials can guide you through the process. For more advanced systems, though, you may need to dive deeper. But if you’re not into coding, you can always choose open-source tools or managed services as more affordable alternatives.
Are crypto trading systems profitable?
Crypto bots can definitely make money, but it’s not guaranteed. How well your algorithm performs depends on the tactics it uses and how it handles the crazy crypto market. Bots excel in spotting opportunities and making fast trades that humans might miss. But they can also lose money if the blockchain-based economy flips unexpectedly or the strategy isn’t great. Nonetheless, the right development approach, testing, and regular modifications can help you create an efficient tool.
Are there any risks to using automated trading software?
Yes, there are risks. Automated systems follow the rules you create, but if the situation goes wild, they might not adjust like a human trader. Security is another concern, especially if you haven’t implemented proper security mechanisms during the development process.
Can I use a trading bot solution for decentralized exchanges (DEX)?
Yes! Trading assistants can work on decentralized exchanges like Uniswap or SushiSwap. But they need to be tweaked to operate on those platforms. Some automated scripts already support both DEX and centralized exchanges, so you don’t need to create a new solution and can trade across multiple platforms.