Crypto Trading Bots Are Heading Towards A Decentralized & Self-Custodial Future

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Unlike with traditional stocks and shares, cryptocurrency trading is a non-stop ride, with the markets moving up and down around the clock. Because digital asset prices are constantly on the move and often show a high degree of volatility, it can be challenging for even the most experienced traders to stay on top of things. 

It’s for this reason that many traders rely on crypto trading bots such as and Cryptohopper, which can keep track of the market when they’re not around, using algorithms to automatically execute trades on their behalf.

Crypto trading bots are essentially just automated software that’s programmed to implement a specific trading strategy, based on the predefined parameters specified by the user. They work around the clock, covering for the trader when he or she is unable to give the markets their full attention. 

The exact kind of trading strategy a bot can implement will vary based on the bot itself. Tools suchas 3Commas offer a variety of pre-programmed algorithmic trading strategies, but some will go further and implement their own, customized schemes. 

How do crypto trading bots work?

The most popular crypto trading bots are built by third-parties and generally require users to pay a subscription fee, though there are some free ones. While they’re designed to be easy to implement and offer a choice of different strategies for traders, users generally still need some basic knowledge of coding and technical analysis to get the most out of them. 

Bots connect to centralized or decentralized cryptocurrency exchanges through an application programming interface, or API. This can be thought of as a gateway that allows the bot to interact with the exchange platform and the user’s wallet, execute trades and manage their entire portfolio. 

Most bots make trades on behalf of the user according to simple, or more complex, market indicators and parameters. For instance, their automated trades will be executed based on the price and order volume of a specified cryptocurrency token. They’ll also go by market indicators such as moving averages and the relative index strength. 

For the trader, it’s important to select the trading parameters and indicators very carefully, because these are the signals the bot will look for and base its trades on. Trades will only be executed once the market conditions match with the user’s parameters. 

Because crypto trading bots are given direct access to your digital assets, it’s necessary to place restrictions on the API to limit the kinds of actions bots are allowed to take. In addition, it’s a good idea to backtest whatever bot strategy you want to implement, to ensure that it will trade effectively and generate a profit. 

 

Trading bot treachery

While trading bots provide distinct advantages, such as the ability to trade 24/7, better market timing, and eliminating human emotions, they can also be extremely risky. 

The risk stems from the fact that most crypto trading bots are centralized programs that must be granted full control of your exchange account. In other words, the bot takes full custody of your digital assets. This can be dicey, as there have been many instances where bots were found to have malicious code. Worse, even some of the most reputable bots have been hacked due to vulnerabilities in their code. 

Such incidents are common. In December 2022, the popular crypto trading bot network 3Commas suffered a data breach when its API keys were compromised, allowing hackers to steal around $20 million worth of funds from its users. A report from Halborn explains that the hackers were able to link their own crypto wallet to the exchange accounts managed by 3Commas. Once the link was established, they took control of the bot and withdrew millions in user’s funds to their own wallet. 

More recently, Telegram’s Maestro trading bot was targeted by hackers, who managed to siphon off 280 Ethereum, worth around $500,000, from a number of users. In this case, they reportedly took advantage of an exploit within the Maestro Router 2 smart contract. The stolen funds were then transferred to the digital privacy nexus Railgun, which offers a crypto mixing service that anonymizes transactions, allowing the hackers to hide the ultimate destination of the stolen tokens. The good news is that Maestro did at least provide a full refund to affected users. 

What’s most alarming about the above incidents is that they involved two high-profile and trusted trading bots used by thousands of crypto traders. However, sometimes the trading bot itself can be malicious, as users of the iEarn Bot discovered to their horror earlier this year. The iEarn Bot turned out to be a sophisticated scam. As the BBC , it was able to attract hundreds of investors who linked it to their wallets. But after a few weeks of operation, the bot suddenly shut down for maintenance and users were unable to regain control of their funds, as they simply disappeared without trace. 

A safer kind of trading bot

As is often the case with crypto, the solution lies in decentralization. Following the collapse of the FTX cryptocurrency exchange last year, many traders have moved to decentralized exchange platforms (DEXs) that allow them to retain custody of their crypto funds while they trade. Similarly, many traders are now looking at decentralized trading bots that can execute trades on behalf of users without requiring custody of their funds. 

ApeX Pro recently the launch of a new Telegram Bot that’s able to trade on behalf of users across its DEX platform. Unlike its centralized peers, the ApeX Pro Telegram Bot does not take custody of user’s funds, instead interacting directly with the underlying blockchain network to execute trades. It’s an approach that’s not only safer, but also more private. 

The ApeX Pro Telegram Bot utilizes something called a “” that prevents certain functions, such as deposits and withdrawals. Instead, the bot can only execute trades, so user’s funds will always remain in their possession. 

Besides giving users peace of mind, ApeX Pro’s Telegram trading bot goes further than most other bots, offering more innovative functionality. For instance, it also acts as a guide, walking users through the more complex features of the ApeX Pro DEX, teaching them how to navigate its platform and execute advanced trades. It also provides tools for users to keep track of their various trading positions, tracking their profit and loss on both open and closed positions. 

A game-changer for automated trading

Crypto trading bots have become an essential tool for pro traders, giving them a way to stay on top of the market even while they sleep. With a trustworthy trading bot at their side, traders can time their trades to perfection and maximize their profits. 

Although they’re essential for many traders, bots are not without risk, as most of them insist on taking custody for the user’s assets. But just as with exchanges, where DEXs have emerged as a safer alternative to CEX platforms, the availability of decentralized trading bots promises to change that. By ensuring users never have to give up custody of their funds, decentralized trading bots can potentially become a game-changer for professional traders.