The industry of cryptocurrency is probably the only industry that has seen a massive adaption scale ever since its inception. There are many things that contributed to this astounding growth, with automation being a leading contributor which resulted in Trading bots. These bots implement something called ‘Sandwich trading’, a popular trading strategy used to double the value of the asset under trade.
They are designed with some of the leading algorithms that will help them place orders at the right time on the right asset automating the whole process of crypto-trading for portfolio holders who aren’t able to allocate time to place an order and with sandwich trading in place, the users will not have to worry about the credibility of the purchases or the profits as well.
What Is ‘Sandwich Trading’?
The complete concept behind sandwich trading with bots is that the bots are designed and programmed to look out for purchases on a specific asset on the blockchain, let’s say Solana or Ethereum for this instance. Once any user starts placing an order on the asset, the bot would simultaneously place an order on the same asset driving up the value. Once the asset is procured by the bot, it would try to complete the trade by selling the same asset to the same buyer or a different buyer at a much higher price than what it was initially selling for.
With this type of trading one, there is a considerable demand created for that particular asset on the blockchain and secondly, the profits are sometimes doubled or quadrupled based on the market conditions at the time of the trade.
This trading technique is slowly increasing in altcoins as these bots are destined to drive up prices for low-valued altcoins and crypto assets that would start creating a sense of demand leading to bullish purchases. It is estimated that there are 400+ bots that are live on the Ethereum blockchain and the number is predicted to rise exponentially over the coming days with the profit margins pointing towards higher stakes.
Speculations On Trading Bots: Truth Or Just Hoax?
With the increase in the demand for tech-like trading bots in the crypto space, it is being reported that the probability of developing and introducing a bot into the market to implement sandwich trading is becoming incredibly difficult. However, a recent conversation with Stanley, a crypto-bot developer at pancakesniperbot.com denied such claims.
He mentions that most of the bots developed and deployed by him are doing well in the market without any issues and the number of clients he has for building these bots has increased in the past few months alone. With millions of transactions happening on blockchains like Ethereum, he says that the probability of two bots clashing with each other is close to zero. He also mentions that these bots are designed specifically to find out the nature of transactions which helps them distinguish between a bot and an actual user.
More Traffic, More Restrictions:
The one common problem usually seen with these bots and this trading practice is that the demand for any crypto asset increases rapidly and sometimes smaller blockchains like the Solana are left with high traffic and congested transactions leading to slowness. But if the capability of the blockchain to handle inbound traffic is high, this should never be a problem. Blockchains like Solana are looking forward to implementing “Flow Control” measures to control such issues in their ecosystem in the future.