There is no doubt that Bitcoin is by far the most famous coin in the world. The digital asset’s popularity could be judged by how it is synonymous with cryptocurrency to those who aren’t too familiar with the sector. To them, the terms “Bitcoin” and “cryptocurrency” are interchangeable.
When it comes to the crypto sector itself, things aren’t that different. As the world’s first blockchain-based currency, Bitcoin is all the rage on digital asset markets. Whether you are making trades occasionally or on a daily basis, BTC seems to be present everywhere.
That is why, among the plethora of other cryptocurrencies, Bitcoin is the preferred digital asset to use with automated trading bots. It is not just for the sake of its popularity either. For those who want to use bots, using BTC for automation brings about a host of benefits to the table.
Why Choose Bitcoin for Automated Strategy?
No matter the crypto exchange you choose, whether it is a centralized entity or a decentralized platform, you are bound to find BTC as one of the foremost trading pairs available on the market. Save for a few platform-centric decentralized exchanges, this phenomenon holds true for all cryptocurrency exchanges.
This adds to the overall level of accessibility for Bitcoin holders, who don’t have to exchange their BTC into any other cryptocurrency before they start placing orders on an active basis. This accessibility has a major role to play when it comes to trading bots.
Your bots could have more pairs to play with without having to make dual conversions. At the same time, they also have a higher volume to make use of.
These aspects allow your automated algorithms to make trades faster. In turn, this increases the number of orders you can place during a specific period of time. And the more trades you make in a single session, the more chances you have for higher profits.
Apart from saving your time and allowing you to make more trades, using Bitcoin pairs also works in terms of cost efficiency. If you use a cryptocurrency other than Bitcoin, transacting with BTC pairs will often require you to first convert your altcoin to BTC before you can make any trades. To make this conversion, you would need to pay additional exchange fees on each trade that you are about to make.
But if you are using Bitcoin as your primary coin, you can easily avoid these additional fees. Unless you are going with exclusively altcoin pairs, you don’t have to convert your BTC to another cryptocurrency. You can just make trades right off the bat by selecting BTC-centric pairs.
With that being said, using BTC in automated trading is no bed of roses. It comes with its own drawbacks, which are essential to know if you want to make substantial profit with bots.
Why Bitcoin Might Be a Bad Choice for Bot Trading?
While BTC gives you faster trades and greater accessibility, it falls short on a couple of other aspects.
Since BTC is the world’s premier cryptocurrency, it is also a rallying point for the price of other altcoins. When Bitcoin’s value goes up, altcoins’ value takes a trip upwards with it. And when BTC price takes a dive, altcoins have to follow suit whether their holders like it or not.
Whenever you trade BTC with other crypto assets, it often provides you with minimal gains, since the price of Bitcoin and the value of the altcoin are often moving in the same direction – whether it is upwards to show gains or south to show losses.
While trading with BTC and altcoin pairs offers differing levels of profits in terms of successful trades, it doesn’t offer as much gains in terms of market manipulation. By making rapid trades in BTC-altcoin pairs, you are essentially getting the same increase in profit that you would have if you were simply holding your Bitcoin. The very same notion applies to any losses in value.
On the other hand, if you trade BTC against stablecoins that have their value tied to fiat currency such as USD, it provides you with a greater chance to make higher profits that you would have missed out on otherwise. Any losses that are incurred in these pairs are more due to market movements than being inevitable.
That is why, it is advised that whenever you are launching a trading bot using Bitcoin, you focus on the pairs that work in relation to stablecoins than simple altcoins. This saves you from the redundancy of assets that are essentially following the same rallying point to determine their value.
Why Choose Other Altcoins?
Seeing the aforementioned mechanism, it is advised that while you use Bitcoin as your primary cryptocurrency for trading, it is good to play with other digital currencies if you want to trade in digital assets that are not stablecoins.
Trading with altcoin pairs lets you play off of their difference in pricing without having to tie yourself to the primary asset and value decider that is BTC.
To move forward with this particular mechanism, it is best if you convert some of your original Bitcoin holdings into a popular altcoin of your choice, and use the pairs from there in order to play on market indicators and analyses. It’s because altcoins offer more volatility to the markets, and this is one factor that allows you to make larger profits in the long run.
Once again, choosing altcoin is not a failsafe mechanism and doesn’t save you from its own disadvantages. That is why, you need to be very vigilant in trading with them.
Why Altcoins Can Be Bad?
Trading with altcoin bots does not offer you the same volume as with Bitcoin. This could hold you off from making use of an increased number of opportunities.
Another problem that comes with using altcoins as default pairs is that you can end up holding some altcoins that you actually did not want to hold.
When you utilize an automated strategy, each bot will be buying and selling coins according to the pairs you specify. This way, you can trade with a plethora of cryptocurrencies.
But on the other hand, this could also make you end up holding non-valuable altcoins, which in cryptocurrency slang are also known as “shitcoins”. Keeping this in mind, you need to be very careful in picking up your pairs. Never buy or trade in altcoins that you don’t like.
What to Choose?
Whenever you are using automated bots, it is essential that you keep diversification in mind. As one of the most crucial trading tips, diversification lets you make use of the gains, losses, advantages and disadvantages of both Bitcoin and altcoins, while also keeping your investments as safe as they can be.
Whenever you delve into automated trading, make sure that you are running more than one bot with different settings and cryptocurrencies. This ensures that you are using all the tools at hand to benefit from various assets and strategies at once. This way, if you are not able to make your desired profits from one pair or bot, you could count on the other one to perform better than its counterpart, so on and so forth.
Remember, when you start automated tool, the key is to make as many good trades as possible through market analysis and movements. But it does not mean that 100 percent of your trades are going to be successful. In order to manage these potential losses in a manner that doesn’t lead you into a financial cul de sac, not putting all your eggs in one basket is the way to go.
Keeping this in mind, it is essential to understand that while Bitcoin could be a great primary asset to perform automated trades, it is not the only player on the market. Keep an open mind in terms of using different cryptocurrencies, and you would be able to gain optimal advantages from automated bot trading.