Welcome to the Trading With A Bot channel. What we're looking at here is a chart showing
an apparent fluctuation in a price, where the price continues to go up and down, however is
staying consistently within a certain range. This is a Wrapped Bitcoin WBTC and BTC crypto pair
chart. In January 2019 a group called WBTC DAO had introduced a concept of a Wrapped Bitcoin,
an Ethereum token that's backed 1:1 by Bitcoin. WBTC is an ERC20 token that represents
Bitcoin (BTC) on the Ethereum blockchain. There are multiple advantages of such a token for
Ethereum wallets, dapps and smart contracts and so it quickly gained acceptance and popularity.
The chart you're looking at here is showing an extreme close-up on the price.
If we were to zoom
out the fluctuations we see become negligible. After all, the WBTC should always be equal
to 1 BTC based on how this token is designed. This begs a question: Can the high frequency
trading bot such as Bitsgap take an advantage of these tiny fluctuations within the price range?
After all, if the value of the Wrapped Bitcoin will always be equal to the actual Bitcoin,
our investment will never lose value and we may possibly earn small gains from these fluctuations
within the circa 1 Bitcoin range. I am about to start a bot ranging from the bottom price of
0.995 to an upper price of 1.0005 with a total of 12 grids. Such a large number of grids in such a
small price range will result in a tiny grid space percent. in this particular case equal to 0.05%.
I will allocate circa 0.004 Bitcoin for this bot. The bot is started now. You can
see the 12 grids I've set up. Green color lines indicate that these are
buy orders that are ready to be executed. As of this moment the bot
has not bought any WBTC yet. Let's fast-forward now to see how this WBTCBTC
bot with a given grid spacing will perform.
Fast-forward by eight and a half days. Eight and a half days had passed now since
I've started this bot on January 19th. Remember, my goal was to experiment trading WBTC
BTC pair via Bitsgap bot. I had set up a 12-grid bot within a price range from 0.995 to 1.0005,
leaving only 0.05% as a grid step percentage. And so with this set up, since 8.5 days of the
bots operations, it had managed 175 transactions. Look at the chart above – the green lines show
the grids and price levels in which the bot will buy WBTC for BTC and the red lines show the
price levels at which the bot will sell WBTC back for BTC, making a tiny profit with
each transaction. The green and red marks on the chart indicate the Buy and Sell
transactions that took place during that time. As discussed earlier, the price of the Wrapped
Bitcoin (WBTC) should be equal exactly to the price of Bitcoin, i.e.
1 WBTC should be equal
exactly 1 BTC. But as you can also see, there are occasional spikes in the prices. These are
exceptional opportunities to make an extra profit. You can take advantage of them only with an
automated bot, which quickly sets new Buy and Sell orders when the price is fluctuating.
Still, however, these fluctuations are rare and most of the time the price of the
WBTCBTC pair is within a narrow range. During such time there may be little or no
transactions at all. The bot is just waiting. You can see now the result of my experiment.
The price does fluctuate sufficiently to make a small profit while staying within a predictable
range to make this trading safe. In other words, we can hold on to our Bitcoin by doing these
occasional trading transactions with a Wrapped Bitcoin and earning a small percent of profit.
Here, again, you can see that from 22nd to 24th there were no transactions at all, but there were
plenty of the Buys and Sells before and after. In total, 175 transactions within a period
of 8.5 days the bot had generated 0.51% of profit.
Personally, I think this is an
excellent result considering that there is very little risk involved in trading this pair and that
I am "hodling" my Bitcoin. An important question that remains is the following: Have I optimized
my grids to reach the most effective outcome? For this bot, as an experiment, I have only
invested $144 worth of Bitcoin. If I had placed more money into this bot, I could make the
place between the grids even smaller. But would it be worth, it considering that my exchange
is taking a small fee for each transaction? Let's look into the details. Binance is charting me 30 satoshi for each
transaction. Here as I scroll down to the very first Buy, my total bot profit is -30 satoshi. My
second transaction is also happens to be a Buy, so now I am in the negative 60 satoshi. But then
the price went up, the bot had made a sale and a profit of 86 satoshi.
I am still in the red, but
not for long. The profit from the fourth Sell is enough to make my overall bot profit positive.
From now on the bot profit will only continue to grow. The 86 satoshi of profit from a Buy and Sell
pair is bigger than 30 + 30 satoshi I pay in fees. And even though these are extremely tiny amounts
it is the predictability and consistency of this bot that make it attractive to me.
fees were lower, which is possible on Binance depending on our VIP level, the profit
percentage and the amount would be even larger. My bot profit was over 2,000 satoshi and
the overall investment had grown by 0.38%. Another way which I look at auto-trading this
particular crypto pair is as if i were to receive an interest for holding my Bitcoin: 0.35% for
eight-and-a-half days is a reasonable interest rate. Here, the Backtest statistics are producing
a similar number: 0.31% in 7 days and 1.33% per month. It is not compound, unfortunately,
but would still add up to over 15% per year. I think that is all I can share with you
in this video about auto trading WBTC/BTC. Please let me know if my experiment, commentary
and conclusions had made some sense to you. Tell me if there are inaccuracies or
mistakes in my logic or assumptions. The purpose of these videos is for me to share
with you what I learned through trial and error, and I would certainly appreciate
your feedback to continue to improve. And by the way, I am also on Twitter
Stay in touch!.