2020 has been a wild year for investors: Covid-19 has taken the financial markets for a wild roller coaster ride; interest rates have hovered close to negative territory, stalwarts like gold and silver are flatlining, and government bonds are seeing 10-year lows.
But there has been a silver lining to 2020's market volatility, and that is in the normalization and acceptance by major Wall Street players and Fortune 500 companies that cryptocurrencies are not only a legitimate and a valid form of investment, but that smart investors looking to balance their portfolio during these uncertain times need to include cryptocurrencies as part of a well-balanced investment portfolio, and as a source of passive income.
Cryptocurrencies have arrived kicking and screaming into the financial mainstream. Financial experts estimate that public companies are currently holding almost 6 Billion USD in Bitcoin alone. Multi-billion dollar asset fund Stone Ridge purchased 115M USD of Bitcoin in 2020, and FinTech giants Square and Microstrategy have also purchased large amounts of Bitcoin this year. Bessemer Ventures, a $5bn investment firm, says institutional demand for Bitcoin has hit an inflection point, which will help turn the cryptocurrency into a globally accepted asset class. This legitimizes Bitcoin and other credible digital assets.
This global acceptance of cryptocurrencies by financial and FinTech giants is a far cry from the not so distant era of semi-underground crypto mining that was more or less limited to hardcore computer geeks, I.T. professionals, obscure subreddits, and murky governments with cheap or subsidized electricity.
The value of cryptocurrencies has increased exponentially in recent years, partly due to the inherent scarcity of the cryptocurrency mining process itself. Legitimate cryptocurrencies require solving a proof of work algorithm that becomes more difficult to solve as more cryptocurrencies are mined. There's also a predetermined limit to the number of crypto coins that can be mined.
But the main reason behind the popularity and strength of cryptocurrencies is the growing faith among financial experts and the general public in the safety of the underlying blockchain system that validates legitimate cryptocurrencies.
This growing faith in the underlying blockchain technology will continue to drive cryptocurrency's value and popularity as a passive income source and as a shelter during financial market downturns.
These factors have taken cryptocurrencies out of the underground and placed them squarely among other legacy investment vehicles that are part of a well managed, well-balanced financial portfolio.
As the cryptocurrency market grows and becomes more mainstream, it has also started to shed the worst of its wild gyrations that peaked back in 2017 when Bitcoin had a spectacular ride that started below USD 1000 per coin and then rapidly accelerated into the stratosphere.
The levels peaked at almost 20k USD per Bitcoin, only to see an equally spectacular drop that drove it as low as USD 3800 per Bitcoin. These wild rides have become rarer now, with Bitcoin hovering around the 10k USD mark for most of 2020, despite the financial markets' volatility during the same period.
This normalization and stabilization of Bitcoin and other legitimate cryptocurrencies backed by blockchain technology have been further legitimized by the rise of Bitcoin Investment Trusts and other similar investment tools that trade on cryptocurrencies futures as stocks within your regular brokerage account.
This enables investors to enter the cryptocurrency markets directly, or through their legacy brokerage account. Investment giant Fidelity is already recommending its customers to keep at least 5% of their investment portfolio in cryptocurrency or cryptocurrency futures.
The rise in popularity of cryptocurrency trading bots is due to a few key factors. One factor is that cryptocurrency mining is not as straightforward or as profitable as it once was (unless you have access to virtually free and unlimited electricity and the computer hardware to crunch the proof-of-work algorithms).
Another factor is that cryptocurrency markets never sleep. They run 24/7; this means that it is inevitable that fluctuations in price offering opportunity for profits will occur when a certain percentage of investors are sleeping.
Smart cryptocurrency investors don't want to wake up and realize they've missed a big market move. Therefore, cryptocurrency investors must use a trading tool that also doesn't sleep. Enter the cryptocurrency trading bots.
To put it simply, a cryptocurrency trading bot is a computer program that executes a buy or a sell of a particular cryptocurrency based on predetermined parameters set by a cryptocurrency investor.
Cryptocurrency trading bots run 24/7 and work as a passive source of revenue even when investors are asleep. Trading bots are also a great tool that removes human emotion from your cryptocurrency trading. By only executing pre-set buy and sell orders at predetermined prices, investors can plan their crypto trade strategies days or even weeks in advance, eliminating panic selling or buying at the wrong time.
Another great benefit of cryptocurrency trading bots is their ability to analyze historical data in order to inform future investment strategies. Some investors also like to let their bots run in sample mode (I.E., trade without executing orders) to analyze market performance, enabling a preview of how their planned strategy is expected to perform in the real world. However, keep in mind that they are not a cash machine and will have their ups and downs.
Smart investors should also always consider the pros and cons of every investment tool they use. Cryptocurrency trading bots provide a fantastic array of services and features designed to generate passive income for smart investors. Still, part of being a smart investor is being aware of the limitations and the benefits of trading bots to avoid potential pitfalls.
1- CryptoBots are not human.
A.I., algorithms, lines of code, machine learning. Crypto Bots can be made out of many things, but it's a computer program at the end of the day. Investors have to be aware that they are handling their crypto exchange account to a computer program and should approach and use them like one.
2- Not all crypto bots are created equal.
Smart investors need to pick the right crypto trading platforms for them and, most crucially, do the research to only work with reputable crypto bot providers and exchanges.
3- As with any online resource, hacks can happen.
Smart investors must keep their funds divided among various cryptocurrency exchanges in order to limit their exposure to risk.
4- How can I further ensure that my crypto bot is safe?
It's a good idea to limit your API parameters so that your crypto bot can buy or sell but not withdraw funds. You can also restrict I.P. addresses so that all buy or sell instructions must come from your I.P. address.
5- What cryptocurrency trading bot should I use?
While there are tech-savvy people out there that have coded their own crypto bots to make trades, part of the democratization of cryptocurrency trading is the rise of services designed to make it easy for the average investor to avoid a big learning curve and jump right in into cryptocurrency trading safely and efficiently.
But not all cryptocurrency trading platforms are created equal, so smart investors are well-advised to stick to highly reputable services like NapBots, which not only has great reviews at TrustPilot (one of the top software review & trust sites) but also has a reliable track record designing and deploying high-performing cryptocurrency trading bots for a variety of highly liquid crypto assets, including Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash, Binance, and EOS.
NapBots is also the only cryptocurrency trading service that enables investors to combine multiple crypto trading signals simultaneously. Combine that with NapBots ease of use and low all included cost, smart investors are well-advised to start trading cryptocurrency like a pro with a NapBots subscription.
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Disclaimer: This information is not an offer to buy, sell, or hold any cryptocurrency. Individuals who may copy within the CopyTrader Program are not deemed investment advisors and their performances in the past are not indicative of future results. All investment and copy trading carries risk and you should do your due diligence before investing. Article written by NapBots.com