The Pump Effect; Altcoins can be DANGEROUS to Trading Bots
Why I only use trading bots on BTC, ETH, and LTC….
Why I only use trading bots on BTC, ETH, and LTC….
Note : I am primarily speaking of the the Martingale bots I use to generate a personal income in USDT.
There are other bot strategies more suitable for altcoins and for building long-term positions, but you definitely need to know what you are doing and be very careful if you are going to use any bot with small-cap altcoins.
The recent Bitcoin price fall and it’s impact on many smaller cap coins illustrates perfectly why I just don’t risk using trading bots on anything outside “the original three”.
Maybe that will change with new strategies, but with the Martingale bots I love, nope, not worth the risk.
It’s not hard to notice that, when Bitcoin pumps, it brings the entire bag of other coins and tokens along for the ride.
Usually, all the other coins pump harder than Bitcoin. Having a smaller market capitalization means that more money flowing through the entire ecosystem will have a greater impact on those coins, than it will on coins with larger pools of money flowing.
In short, and for example sake:
For a coin with a few hundred billion of market capitalization, an inflow of, say, 10 million, isn’t going to move the needle very much.
If a coin has a market cap in the millions, an inflow of 10 million will push on it’s value needle big time.
This is why smaller coins pump harder than established coins with lots of money already in them.
When Bitcoin pumps, smaller coins can still go to the moon.
(A great opportunity for well-timed limit orders, signal trading, and, specifically, moon bots!)
What I don’t see many talking about, is how the inverse is just as true.
When Bitcoin dumps, Altcoins dump much harder!
In 2021, one year into playing with trading bots — I got the balls to open a Polkadot bot and ride a bot to the peak of around $40. Then the “crash” happened, and Polkadot went to $10. Polkadot rode the wave again in 2022, soared to new heights at $54 or so, but was then dragged down to $5–6 range in 2023’s price crash, and DOT hasn’t recovered. This last bull run, only pumped from $4 to $8, no where near the heights in previous years.
Luckily I stopped that bot in 2021 and didn’t “let it ride”.
The Pump Effect hit the entire ecosystem very hard in 2021, and again in 2022, and it’s happening again this year, furthering the downward trend on many coins that never totally recovered from 2022’s price crash.
A few Examples :
2021 Bull Run
6 month time frame starting in January.
BTC — surges from 8k, past 60k.
DCR — surges from $40 to $220+
Litecoin surges from $120 to $350+
DOT surges from $6 to $40, along with many other coins.
That was a fun ride up wasn’t it!
Whoopie!
Here comes “the crash”!
BTC falls back to $32k
DCR falls back to $65 or so, then all the way down to $15 in 2023.
Litecoin falls back to $113, then down to $55 in 2022.
DOT falls back to ……$10, then all the way to $3–4 in 2023
Bitcoin looses 50% of it’s pumped value.
Many other coins loose over 70–80% of their pumped value.
So, if the pump effect hits LTC too, why do I use bots with LTC?
It’s been a love hate relationship, honestly, until I came to know LTC very well.
LTC is now somewhat predictable to me, so I take advantage of that — as I discuss here:
Now that I feel somewhat familiar with the way LTC behaves during a bull run (and after it), I am more confident in my ability to make decisions that prevent my LTC bots from taking permanent loss.
Other coins, I just have no idea really.
No freaking clue.
I know how to watch BTC, and based on what I have seen from the other coins experiencing far more extreme downward pressure than upward momentum after bull run season recedes, I just don’t feel it’s safe enough to run bots on anything but BTC, LTC, and ETH, until I develop strategies that can capitalize on those movements.
Thank you for reading!
Until next time….
Onward and Upward Everybody!
-Chris
My new YouTube channel, 100% focused on trading bots! >>>
#botlife
This channel provides content about cryptocurrency and cryptocurrency related topics with a focus on providing tutorial…www.youtube.com
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