How to apply machine learning (ML) to crypto bot development

You probably already know that cryptocurrency trading bots are taking over the crypto trading market. So now, in addition to competing coins, there’s probably even fiercer competition between trading bots. In trading nowadays, machine-learned bots do have the edge over simpler bots. To beat the competition, a lot of developers advertise their products with popular and hot words such as “Best AI” or “Best machine-learning bot”. In fact, machine learning is the essence of many trading bots, but be careful. A lot of fraudulent bots use this as an advertisement to attract customers, while they are in fact either flimsy, poorly made, and have no connection whatsoever to machine learning, or are malicious and designed to scam you and bring you losses.

This article will help you understand the basics of machine learning and how it is used in today’s market, as well as warn you about scammer bots pretending to be based on machine learning.

Machine learning and trading bots

There are a lot of different trading bot types, each bringing a completely different angle on trading. For example, some bots take advantage of different margins on different platforms, while some borrow funds from exchanges and trade with that extra capital.

However, the most recent ones are usually the topic when machine learning is mentioned, and these are advanced, technical bots. They also trade crypto, but if we look into their deep structure, there is a lot more going on. They are based on complex artificial intelligence that can inspect huge amounts of data on the crypto market, and pick up that information in real-time using an API (application programming interface). This information is then put to use to make particular trading decisions, and together with user-defined input strategies, the bot should be able to predict crypto coins’ prices. This is the basic unit of measuring a bot’s success, which is perfectly logical.

The best bots are the ones with the highest rates of success in predicting advanced market movements because this is what brings profit. High-end bots have multiple sources for their information, including social media, news, market makers, and so on. Machine learning is basically used to predict which factor will have a social impact and influence the prices.

API explained

Application programming interface, in this context, is a bot’s primary interface in which it interacts with the trading platform. It connects the bot to exchange and provides market data in real time. It is the bot’s gateway to making trades on a specific platform.

How to build a machine-learned bot

If you’re considering building a crypto bot, there are certain prerequisites and things you should know. AI in crypto trading is actually based on reinforcement machine learning. If you are a developer, you have a head start and can do great with hundreds of online courses available.

If you are just a crypto enthusiast, know this: it takes a lot of software engineering knowledge, as well as math proficiency for such a feat. The math behind it is pretty advanced (Bellman equation can be hard even for people proficient in math). This should not bring you down, as the applied portion of it can be learned, but bear in mind that you still need great IT proficiency. You need to know neural networks, and the basics of machine learning to start developing a bot.

Are there any machine-learning crypto bots on the market?

Yes, there are lots of them. The market is filled with advanced ML trading bots that are, in fact, well-built and can be utilized for building a good long-term strategy.

If you develop a good trading strategy, their potential is the highest of all bots. However, scammer bots are also flooding the market, and we’ll show you what to watch out for by giving you insight into what a fake bot looks like. You can start by checking out this debunking of the Ethereum code bot.

An example of a scam – Anon System

Anon System is an alleged AI trading bot that wants you to deposit a minimum of $250 and offers a completely automated trading bot. It was debunked by ScammerWatch, which is a great resource for learning about different scammers – check out the details on ScammerWatch. Here are the most important red flags detected:

• The company is completely untransparent, its background and credentials don’t check out, and it is impossible to find where it is legally registered. The fact that they brag about their hacking skills only worsens the matter.
• They exhibit similar behavior such as known scammers Bitcoin Bank, Bitcoin Billonaire, and Bitcoin Machine, and are suspected to be a part of that group.
• The company lists celebrities such as Kate Winslet and Gordon Ramsey as people supporting them, while there is no record of this ever happening.

About the author

Michael Klias