I Used a Free Cryptocurrency Trading Bot and All I Did Was Lose Money

When I look at order books on any exchange, it’s evident that they’re all being manipulated by bots. The moment I put a sell order, a bot places his 20 BTC sell wall one satoshi above mine. That’s the sad, sombre story of exchange trading; if you’re looking to make a few quick trades to play the swings, the bots will eat you alive. So I looked around and found Youtube channels, Steem threads and reddit posts all shilling their various paid bots. Those were counted with the money counter machine amazon from $20 to $400, and with the constant “use my referral code for a 0.0001% discount” type shilling, I was instantly wary. I looked at Github and tried to find an open source alternative.

Some background about me – I run this website on my own web server, so I’m familiar with VMs and VPSs. Over the years I’ve cycled through Digital Ocean, Vultr, Linode and AWS and at any given point I’m running a bunch of websites on each of these platforms. I’m pretty comfortable with spinning up a $2.5 per month Vultr instance to test out a bot. I don’t really know any coding though, so I wouldn’t be able to alter any scripts I find or code my own models. So my only option is to find a “crypto trading bot” that’s readily available and get it working.

Setting up the bot wasn’t too hard. I literally had to spin up a VPS, clone the github repository and install some python libraries. Get the API keys from the exchange I use, Binance, and add them to the bot. Basic instructions that are already detailed on the installation page, so anyone can do it.

What this particular bot did was identify the selling price of a particular cryptocurrency on Binance. Let’s say it’s Bitcoin with a trading pair of Tether, so BTC/USDT. You input a set profit percentage you’re looking for, let’s say 1%. The bot will then simply see if the ask price is more than 1% of the selling price, and then automatically execute a buy order, with a sell order 1% higher immediately following. You can adjust the amount you buy and the pair you buy it with. Sounds good, so I gave it a try.

My first experience was running into various API issues. Those were likely caused by the Binance outage and their DNS errors, because switching the subdomain brought it back. Finally, I was making some progress and my trades were executing. I let the bot run overnight with small amounts on the NANO/BTC pair, since it had a good volume, has enough fluctuations to make trading worth it, but stays relatively stable without huge spikes or pumps.

Here are the issues I ran into

1. The bot would make a buy order when there was a large dump in price (due to its simple algorithm that only saw price difference), and the sell order immediately after would never execute since the price stayed low for days or weeks.
2. No order would ever execute at profit margins higher than 0.6%, since better, more robust bots would always fill in those gaps before you. Binance is especially notorious for its various flavours of price manipulating cryptocurrency trading bots.
3. When orders did execute, Binance’s fees ate into the transaction. 0.1% fees (0.05% with BNB) meant that at the profit level I was forced to execute (<0.5%), fees made up a significant percentage. With the risk I was taking running such a basic strategy, it lead to me losing money more often than not. This problem wasn’t so bad when the fees were reduced by 70% after the Binance outage.
4. The bot would often not be able to cancel its buy order in time, making me buy cryptocurrencies at higher prices than I would be able to sell at. This was either a loss that I had to eat by selling low (manually) or wait hours for the price to return. In some cases, it literally never returned and I’m stuck holding some heavy bags (looking at you, Nano).
5. The combination of these problems meant that I couldn’t keep this bot running 24×7. I usually ran into the above problems within 2 hours, in which I was lucky to make 0.05% profit. With low amounts (and if you’re looking for free crypto bots, let’s be honest, you’re not a high roller), this becomes not worth it very quickly.

Basically, the algorithm was too basic to make any money. Buying low and selling high is easier said than done when there are other crypto bots out there that trade on things like RSI and MACD, and even those lose out to proprietary bots that I’m sure financial institutions are running on these exchanges 24×7. If you have the programming knowledge, you should try building your own bot and see if you can use some investing tools that various exchange APIs offer. If you don’t, it’s much better to simply do some fundamental analysis and buy coins with good fundamentals.

This post isn’t mean to shit on the particular bot I happened to choose – in fact it’s the opposite. While everything else on the market is behind some sort of paywall, this was the only one with some semblance of legitimacy that I could find. I’m sure if I wasn’t looking at Github and instead took the most popular free crypto bots from a Yahoo or Bing search, I’d land up with malware that stole my private keys and mined Monero on my server at the same time. But it just highlights the well known adage within crypto bots – if someone sells a bot, why don’t they just use the bot themselves to make more money while keeping the competition low?

Disclaimer: Despite making fun of referral codes, this article contains some of those. Cryptocurrencies mentioned are also not investment advice.