Cryptocurrency Trading Bot vs Buy and Hold Trading Strategy

Abstract

In recent years, the tendency of various financial experts has accelerated towards cryptocurrencies. Cryptocurrencies are also included as pure digital assets by asset managers. Even though they have their separate nature, their behavior as an asset and trading strategies are still in process of being understood. The most common strategy is to buy and hold, but due to the high volatility of the market the Sharpe Ratio (which represents the risk-adjusted return of the investment) is often low. Therefore the process of implementing more favorable trading strategies and algorithms can be automated using programming. This paper proposes automating the trading process with trading strategies and then Backtesting the trading strategy with historical data and implementing it in python, by using Binance API to get real-time market data and TwelveData API to get the historical market data of the cryptocurrency. This trading bot uses algorithms that follow a trend and refer to a predefined set of instructions to perform favorable trades. A well-timed trade can generate revenue at an inhuman speed. Our objective through this project is to take this revolution in the market by providing an efficient and effective solution that can overcome the limitations that are being faced due to manual trading by applying various available algorithms for day trading based on market conditions and user approach.