Crypto Trading Bot Scams- What you Should Know

The concept of cryptocurrency was introduced by Satoshi Nakamoto in 2009 with Bitcoin, but even he couldn’t have envisioned how big it would turn out to be. Today, cryptocurrency markets are renowned for their volatility, which can present traders with a wide range of investment opportunities. Crypto trading bots are one of the tools that you can use for leveraging these opportunities and they have the capability of doing an excellent job, better than a human being could do alone. These trading bots are computer programs that log into crypto exchanges and make trades on behalf of the trader.

The effectiveness of these crypto trading robots can depend on their programming and how suitable it is as per the current market conditions. If you do some research, you will discover that there are different types of trading robots that are designed to suit varying individual needs and market conditions. Different types of bots apply different trading strategies. For instance, if you want to make consistent and small profits in a sideways market, scalping is the way to go. A scalping bot is designed to place the trades automatically for making profits in the market. This strategy works well in a sideways market, but will not give the same results in a bearish or bullish situation.

Hence, when you are looking at crypto trading bots, you should think about the strategy you wish to use and choose one accordingly. You also need to have a clear understanding of the technology behind the trading robot in order to take complete advantage of it. Xtrgate is here to explain to you in detail. Let’s take a look at everything you need to know:

What are Crypto Trading Robots?

In essence, crypto trading robots are automated trading systems or signals that are used for automating the whole trade execution process. The antiquated trading methodologies have now been replaced with algorithmic trading as technology advances and it is used for conducting majority of the trades worldwide. The engineers, designers and developers behind legitimate crypto trading robots are aware of this process and have used their knowledge for developing truly profitable automated crypto trading systems and apps.

However, like other type of crypto scams, there are numerous greedy scammers who are just interested in piggybacking on the latest crypto craze. Hence, you will also come across a large number of fake crypto trading robots that have been developed primarily for stealing your money and generating profits for dirty brokers and online promotes who are orchestrating these scams.

Well-Known Crypto Trading Bot Scams

Obviously, no crypto trading robot will advertise itself as a scam, but there have been some that have become notorious for scamming a huge number of individuals. Crypto Robot 365 is one of these and this fraudulent software has deceived and misled hundreds if not thousands of naïve and newbie traders who were only interested in cashing in on a legitimate automated crypto trading app. This fake trading system was able to gain so much recognition because it was being endorsed by some of the most prominent review sites in the industry. These are acting as de facto affiliate marketers and are getting hefty commissions for referring customers.

Other than this crypto scam, there are also other fake robots such as Bitcoin Loophole, Bitcoin Code, Crypto Edge and BTC Robot. These are all get-rich-quick crypto scams and have ruined the lives of many people all over the world by stealing their hard-earned money. Due to such crypto trading bot scams, many people find it difficult to trust those that are legitimate like Haas Bot, Gunbot, Gekko, CryptoTrader and more.

Regulatory Aspects

Just like exchanges, you also need to consider the regulatory aspects of crypto trading bots and it is best to look at it from two perspectives. First and foremost, there are some crypto trading bots that are integrated with brokers and the other kind of bots are the ones that trade cryptocurrencies for you when you plug them into exchanges, such as Bittrex, Bitfinex, Poloniex, Kraken and Cryptopia. In both of these situations, the software itself is proprietary, which means it is not patented.

Therefore, it is essential that you be aware of the regulation regarding cryptocurrency trading in your legal jurisdiction. For instance, traders who are considering using a crypto trading robot in Australia will first have to check what the ASIC has said about crypto trading and the use of bots before using them or those in Sweden who want to use same will have to be aware of European regulation.

Types of Crypto Trading Bots

There are two kinds of crypto trading robots that can be found. The first category comprises of robots that are involved with actual investing, which means they trade real cryptocurrencies i.e. they are buying and selling real Bitcoins or other crypto for making profits in price margins. For instance, if you purchase Bitcoin for $5,000 and then you later sell it off at $6,000, you will be able to make a profit as per the trade size.

The second kind of crypto trading bots are similar to futures trading. They do not purchase or sell real BTC; instead, they speculate that the cryptocurrency in question will decrease in value. Thus, if you sell a ‘short’ contract and the value goes down just like you predicted, then the margins will be reflected in your brokerage account. This is referred to as CFD (Contracts for Difference) trading. Put simply, you will not be trading the actual cryptocurrency as you will just bet on a trend and let the trading platform serve as an intermediary.

You can find crypto trading robots catering to both kinds of trading and it is a smart way of checking if the bot you have chosen is legitimate or scam.

Transparency

What does transparency mean in the case of crypto trading robots? Isn’t it deciding whether the systems you have chosen are effective or not? The fact is that it is not that black and white. Choosing the right crypto trading robot means that you have to consider a variety of aspects. These include figuring out how the systems are getting their trading signals, the type of technology that’s being deployed for integrating with third party providers and more.

Types of Scams

You will come to know that there has been a huge number of crypto scams in the market and the numbers are only going up as the market gains more traction. Crypto trading bots are just another tool that can be used for scamming those who are interested in investing in cryptocurrencies. There are different types of scams that are conducted through these trading bots and this makes it even more difficult for people to realize they are falling into a trap. Some of these trading bots are part of Ponzi schemes that promise quick riches to get people to invest in them. Usually, these are operated by anonymous parties who later take the pool of money and disappear. These bots have also been used as part of fake ads and platforms and can wreak a lot of havoc if you let them. But, how do you distinguish the good trading bots from the bad ones?

After all, you have probably read stories of people earning substantial returns through these trading robots without making any effort. Don’t you want to do the same? If you don’t have any crypto knowledge, having a crypto trading robot make profitable trades on your behalf would be incredibly beneficial. So, how do you avoid the scammers? Here are some tips that can be helpful:

  • Don’t fall for tall claims

One of the biggest signs of a crypto trading bot scam is extremely high returns. Yes, trading bots can offer you solid returns, but not impossible returns. If they are offering massive profits and offering a guarantee, it is best to steer clear of them. As the crypto market is highly volatile, it is simply not possible to guarantee returns because there is always a risk. It is the oldest trick in the book to lure people by offering them big numbers.

  • The developers are anonymous

You should never opt for a crypto trading bot that has an anonymous team. Legitimate crypto trading bots have proper websites where they provide details about the developers. Information about team members and their backgrounds is provided to reassure people that they are signing up for an authentic bot rather than a fake one. No matter what the reason, if the developers have chosen to remain anonymous, it is better to look for a different option altogether.

  • Lack of information about the system

Apart from the developers and founders, there should also be information about how the crypto trading robot works. This means they should mention what strategies are used and how the bot is able to accomplish what it claims to do? If you take a look at some of the top performing crypto trading bots, you will notice that they usually provide details about the technology used in their development. Of course, they don’t give away the magic secret, but enough insight is given to reassure customers about their effectiveness.

  • There are conditions attached

If the crypto trading robot has some conditions attached to it, you need to drop it immediately. These conditions are usually applicable in the case of Ponzi schemes or other kinds of crypto scams and you will not find these if you have ever used a genuine crypto trading robot.

With the help of these tips, you will be able to sort through the options available and select a good crypto trading bot.