Brown
@addisonbb
The extent to which trading bot behavior impacts cryptocurrency price volatility is significant. Trading bots, driven by algorithms, execute high-frequency trades based on predefined rules, amplifying market movements. They can enhance liquidity and efficiency but also exacerbate price swings. For instance, bots employing momentum strategies may intensify upward or downward trends, while arbitrage bots can stabilize prices across exchanges. However, their rapid, automated responses to market signals can trigger cascading effects, especially during periods of low liquidity or high uncertainty. Research suggests that bot-dominated trading contributes to both short-term volatility and long-term price discovery. While their influence varies by market conditions and bot strategies, their pervasive presence—sometimes accounting for over 80% of trading volume—makes them a key driver of crypto price fluctuations. Balancing their benefits and risks remains a challenge for market stability.
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