A bot on cryptocurrency exchange Bitstamp created panic, leading to trading being halted temporarily.


Bot Goes Wild

It is well known that cryptocurrency charts show some abnormal patterns during weekends. Technical analysts attribute these outliers to the trading activity being performed by bots.

In one such incident earlier on Sunday, a bot is reported to have caused wild swings to the price of a few cryptocurrencies including Bitcoin, Ethereum, Litecoin, and Ripple. The activity is said to have lasted for about 30 minutes starting at 1:12 am London time. The trades were executed on Bitstamp, a Luxembourg-based cryptocurrency exchange using the Euro pairs.

“Bot went wild. Trading was halted,” Nejc Kodrič, Bitstamp’s co-founder, tweeted earlier today, clarifying it was a client’s bot.

bot

Price Swings on the Exchange

According to the details available, Euro 6 million worth of Bitcoin was sold within 15 minutes, pulling the price down to $5,760 ($1,000 below the market rate). Then, buying activity worth Euro 6 million was executed in 6 minutes, pushing the price up to $ 7,600 ($1,000 above the market price).  Finally, Euro 1.3 million of BTC was sold, bringing the price at par with the market rate of $6,500. The bot activity lasted for about 23 minutes.

With Ethereum, the bot started the activity at around a similar time and continued for close to 25 minutes. The bot started by buying ETH, sending the price to $270 ($50 above market rate), followed by selling activity, sending the price down to $144. More buying followed with price shooting to $288 before it dropped back to par with other exchanges. One more attempt at buying sent the price to $230.

In case of Ripple, the bot first sold off XRP, sending price down to $0.37, then pushing it up to $0.77 ($0.30 more than the market price) before getting back at par with the market price. The trading action for Ripple lasted for about 29 minutes.

For Litecoin, the activity lasted only for about 5 minutes with the bot crashing the price down to $1.15 before restoring it to $56.

Litecoin

What This Means

Not much can be inferred from this random bot activity as it had no impact on the prices on other exchanges. Cryptocurrency prices, except for XRP, have mostly been flattish over the last few weeks. Experts are predicting a breakout soon from the ascending triangle in the case of Bitcoin.

Trading bots have been used in the traditional financial markets by hedge fund managers for equities, commodities, and foreign exchange trading. Since the cryptocurrency market is primarily driven by retail investors, the bots are mainly used by them.

However, using bots in crypto markets can be highly risky and could turn out to be scams as well. Investors should be cautious and do proper due diligence before deciding to use one.

Have you used trading bots on cryptocurrency exchanges? What are your views about using trading bots? Let us know in the comments below.


Images courtesy of Shutterstock.

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