Towards the end of 2018, having endured 12 months worth of crypto bear market, I was working on a better trading plan for 2019. I came across an interesting blog that was written by a guy who was also looking for a better, more automated way to manage a crypto portfolio. One element of his proposed strategy involved using trading bots to trade BTCUSD.
I had always been very wary and sceptical of using off the shelf trading bots. They generally fall into the category of “too good to be true” for me. Putting myself in the shoes of a bot owner I reasoned that, if I genuinely had a trading bot that was consistently profitable, why would I sell it when I could make all the money I needed just by running it? Nevertheless, because of my desire to take a more automated approach, I began looking for a bot that might work for me.
I was already quite active as a trader on Crypto-Bridge. I liked what they were doing as an exchange, and they’re a great place to trade the coins that I run Masternodes/Staking on. So when I stumbled across a Medium post on DEXBot I was immediately interested. Specifically, the boxes that it ticked for me were:
1. Open-source and free to use, with active development being supported via Bitshares governance. This makes it the opposite of the type of paid for bot that I described above, and made the decision to at least give it a try a no-brainer.
2. Created to support Bitshares based DEXs, by improving liquidity on their trading pairs. I believe this aspect is quite unique among bots. Every other bot I’d come across had been created and sold for the express purpose of delivering profit (often an empty promise?) to a user base, for a fee.
So these DEXBot guys had my attention, and I joined their telegram groups, where I found an active and altruistic community of like-minded people. With their support, I downloaded the latest release of DEXBot and created a fresh Crypto-Bridge (Bitshares based) account to setup my first bot. I recall having a little difficulty at first with getting DEXBot to talk to the Bitshares network. There was an issue with SSL certificates which I overcame with a rather strange fix involving accessing Crypto-Bridge via Internet Explorer on the machine that was running DEXBot. Probably more of a Windows issue than a DEXBot issue.
After that I was up and running with a nice intuitive GUI with which to setup my first bot. I chose ALQO as the first coin to trade against BTC. Why? Because I had some sitting in a wallet, and the ROI for an ALQO masternode had dropped right down (it was almost mined out). So I moved some ALQO and BTS (a small amount of BTS is required to place orders) to my newly created account.
My bot failed the first time I tried to run it. I quickly came to realize that it didn’t like the fact that my account only contained ALQO. This makes perfect sense, since a market making bot needs to be able to place orders on both sides of the order book. So I moved some BTC into the account and restarted the worker. I then watched orders start to pop up on my Crypto-Bridge account. It was working :)
I started out quite cautiously, using a “Staggered Orders” strategy in “Valley” mode. Ultimately I found valley mode to be too slow and conservative for my liking, and have since moved to “Neutral”. Maybe one day I’ll try “Mountain” too, but for now I like the flat order sizing across the price range that “Neutral” gives me.
It turns out that ALQO was not a particularly great choice, either as a coin to buy in the first place, or for DEXBot purposes. I have since gone on to run DEXBot on over a dozen different pairs. Now that I have more experience with it, I can say that market making works best under certain conditions:
1. The trading pair should ideally have a well defined range that you’re comfortable trading within.
2. There should already be some meaningful volume.
I did experiment with setting up bots on small cap coins with low volume, in the hope that my presence as a market maker with tighter spreads might be enough to generate some trading activity. Sadly, I found this not to be the case. Perhaps this was symptomatic of a lack of interest in general during a bear market. It’s a shame since the DEXBot mission statement is really all about driving higher trading volume by providing liquidity. Perhaps this “chicken & egg” situation will fix itself during the next bull market?
For now, my favourite trading pair for running a DEXBot worker is BRIDGE.BTC:BRIDGE.ETH. Needless to say, both of these coins are long term holds for me, and I’m quite happy to use DEXBot to profit from fluctuations in the ratio between the two. Other markets that seem to work well for me are BRIDGE.RVN, BRIDGE.BITG, BRIDGE.POLIS and BRIDGE.BCO.
I’ve also recently setup my first DEXBot worker to trade on OpenLedger. I went for OPEN.ETH:BTS (also my first non-BTC trading pair). The really cool thing about DEXBot is that it works across all Bitshares based exchanges, which potentially opens up arbitrage opportunities.
However, such arbitrage opportunities may be limited unless/until the developers take it to the next level, and find a way allow DEXbot users to trade BTS-based tokens against tokens on non Bitshares exchanges. This would be the one killer feature that in my opinion could be a game changer, both for DEXBot and the Bitshares ecosystem.The DEXBot Team tell me a CEX-DEX arbitrage feature with DEXBot access to 100+ CEX’s via ccxt is soon to be released...