BTC Spot ETF: is Algo Bot Trading a big threat?

[MrSpasybo]

The positive impact of the BTC Spot ETF on the price increase of BTC over the past month is undeniable. The trading volume and net inflows of the BTC Spot ETF market have become important indicators for crypto investors to track to make comments on the state and future of BTC price and the crypto market. That also means that the impact of the BTC Spot ETF is not only through the law of supply and demand, but also guides investors' psychology.

I think the recent event with HODL, one of the ten US-listed Bitcoin ETFs, has shown us some of the scenario.

HODL saw its daily trading volume skyrocket from an average of $17M to over $400M. This increase coincided with VanEck's announcement to decrease its management fees, suggesting a potential link between the two events. However, the sheer volume and rapid rise point to deeper factors at play.

Analyst Dave Nadig suggested the possibility of algorithmic trading or bots manipulating the market. This theory is based on the presence of "headfakes" or “algo cliffs” – large, unfulfilled buy orders placed strategically to influence market perception or trigger reactions from other traders:

"If we zoom in you can see one of these "headfakes" clearly: The green bar is Bids, and over on the right you can see that for this few second window, 100k shares shows up "bid" but 9 cents below the last trade.  Three seconds later its gone never having traded, but it served to "hold" the midpoint down for a few seconds.

None of this is provable "this person did X," But this kind of pattern in ETF trading isn't all that unusual on a "hot" name."

Sophisticated trading algorithms, often referred to as bots, operate at lightning speed, executing transactions within milliseconds – a timeframe unimaginable for human traders. These algorithms can employ various tactics, some of which may be manipulative^[1].

Algo Bot Trading is no longer something strange in financial markets^[2]: stocks, commodities and even crypto. Alameda & Sam B.F. earned a lot of money thanks to trading bot^[3], many CEXs also support the Trading Bot feature for users such as Binance^[4], Bybit^[5], OKX^[6]. However, they are just Trading Bots with small capital when compared to Trading Bots in the stock market.

Many crypto investors are afraid that when Trading Bots join the BTC Spot ETF market, we will not have large fluctuations dozens of times on the BTC price chart like in previous cycles, but I don't think so. BTC has its own story, is still a highly volatile asset and brings high profits to experienced investors. The fact that Trading Bots generate profits from high-frequency trading is also of no concern, as they also help improve market liquidity.

What I worry about is that the stronger the financial potential of the force behind Trading Bots, the greater their ability to manipulate the market. By influencing the psychological trends of BTC Spot ETF investors, they can completely trigger a behavior that directly affects the BTC price in the Spot market, from which they will be able to manipulate the entire crypto market to create optimal profits for them.

I understand that when BTC enters the larger playing field in the form of the BTC Spot ETF, we also have to accept the rules of the new playing field, but the feeling of being at risk of massive manipulation is not pleasant at all.

Do you believe that the HODL event is related to Trading Bot? Are you worried about their impact on BTC price and the entire crypto market in upcoming bullrun?
[1] VanEck Bitcoin ETF records 14x surge in daily volume
[2] Basics of Algorithmic Trading: Concepts and Examples
[3] Sam Bankman-Fried's High-Stakes Entry into Crypto: $500,000 Daily Crypto Losses
[4] Intro to Trading Bots: Understanding Spot Grid Trading
[5] Bybit Trading Bot
[6] OKX Trading Bots

[Yamane_Keto]

This may be true, but the market is available 24 hours a day, 7 days. Liquidity trends are unknown. Manipulation can and does occur, but it is very expensive and cannot guarantee that liquidity will not flow, as the market is open and an estimated percentage of Bitcoin is not known who owns it, and therefore how it will be done. By spending it.

Your concerns could be serious in the case of altcoins. Binance has a significant impact on the market, which makes it, in cooperation with OKX Kucoin, easily manipulate the prices of some altcoins or force them to make changes in the protocol or anything else.

[tranthidung]

Many crypto investors are afraid that when Trading Bots join the BTC Spot ETF market, we will not have large fluctuations dozens of times on the BTC price chart like in previous cycles, but I don't think so. BTC has its own story, is still a highly volatile asset and brings high profits to experienced investors. The fact that Trading Bots generate profits from high-frequency trading is also of no concern, as they also help improve market liquidity.

With or without Bitcoin Spot ETFs, with bigger marketcap of Bitcoin, its will have smaller growth rate with time. Future cycles will give smaller ROIs than past cycles and it will happen without Bitcoin Spot ETFs.

People are too much fearful about negative impacts from Bitcoin Spot ETFs but they actually ignore positive impacts first. Anyone are fearful about Bitcoin Spot ETFs must look at Gold ETFs and their impacts on Gold price. Since 2004, gold has already gone through an exponential price growth and do we have market manipulation in gold market?

Yes, there are market manipulations in gold market.

Bitcoin market is like other markets, has its cycle. Focus on its cycle!
A sixteen-year gold cycle?

[MrSpasybo]

This may be true, but the market is available 24 hours a day, 7 days. Liquidity trends are unknown. Manipulation can and does occur, but it is very expensive and cannot guarantee that liquidity will not flow, as the market is open and an estimated percentage of Bitcoin is not known who owns it, and therefore how it will be done. By spending it.

Your concerns could be serious in the case of altcoins. Binance has a significant impact on the market, which makes it, in cooperation with OKX Kucoin, easily manipulate the prices of some altcoins or force them to make changes in the protocol or anything else.

I can say that Trading-Bot usually does not directly create price fluctuations, but will impact market psychology with thousands of intentional orders in 1 second. Creating fake trading volume also distorts investors' analysis, thereby triggering some extreme behavior that affects price fluctuations. Implementing Trading-Bot is quite expensive, but the profits from market manipulation are even greater.

Currently we do not have the ALTS Spot ETF, even the ETH Spot ETF has not been approved, but I believe that when the BTC price is manipulated, ALTS will also be similarly affected.

With or without Bitcoin Spot ETFs, with bigger marketcap of Bitcoin, its will have smaller growth rate with time. Future cycles will give smaller ROIs than past cycles and it will happen without Bitcoin Spot ETFs.

People are too much fearful about negative impacts from Bitcoin Spot ETFs but they actually ignore positive impacts first. Anyone are fearful about Bitcoin Spot ETFs must look at Gold ETFs and their impacts on Gold price. Since 2004, gold has already gone through an exponential price growth and do we have market manipulation in gold market?

Yes, there are market manipulations in gold market.

Regarding the impact of the BTC Spot ETF: I think they have the effect of amplifying market volatility, rather than changing the cyclical nature of the market. This is the reason why the daily data of BTC Spot ETF is of interest to the market, and the fluctuation of BTC Spot ETF also has an impact on BTC price and the entire crypto market. This relationship still exists, albeit somewhat loosely, since the BTC Spot ETF was just approved last month, but it is not non-existent. Therefore, I believe that if Market Makers can manipulate the BTC Spot ETF market, they can manipulate the BTC price.

In my opinion, Gold is also manipulated by MM, but that does not mean that Gold price changes according to MM's will. MM simply takes advantage of the nature of the market to create opportunities and earn maximum profits.

[tranthidung]

Regarding the impact of the BTC Spot ETF: I think they have the effect of amplifying market volatility, rather than changing the cyclical nature of the market. This is the reason why the daily data of BTC Spot ETF is of interest to the market, and the fluctuation of BTC Spot ETF also has an impact on BTC price and the entire crypto market. This relationship still exists, albeit somewhat loosely, since the BTC Spot ETF was just approved last month, but it is not non-existent. Therefore, I believe that if Market Makers can manipulate the BTC Spot ETF market, they can manipulate the BTC price.

The correlation between Bitcoin Spot ETF trading activities and Bitcoin price actually exists and can not be denied.

It's just the Bitcoin market and participants need time to get familiar with this new massive capital in and out. In future, we will see massive out but first we must familiarize ourselves with their massive inflow first. Recently, the whole market is just shocked by their massive inflows which have never seen before.

It takes time to familiarize with something new and especially very massive.

[MrSpasybo]

The correlation between Bitcoin Spot ETF trading activities and Bitcoin price actually exists and can not be denied.

It's just the Bitcoin market and participants need time to get familiar with this new massive capital in and out. In future, we will see massive out but first we must familiarize ourselves with their massive inflow first. Recently, the whole market is just shocked by their massive inflows which have never seen before.

It takes time to familiarize with something new and especially very massive.

Yeah, with the increase in net inflows from the BTC Spot ETF and the depletion of supply on the OTC market, we have seen a strong increase in BTC price in recent weeks. When the buying pressure from ETF providers is pushed onto CEXs, there is no way to keep BTC prices low!

I have more grounds to worry that if Bot Trading can impact the BTC Spot ETF, it will also have an indirect impact on the BTC price on CEXs. We may already be seeing this, if the BTC Spot ETF's multi-billion $ daily trading volume data is generated and controlled by Trading Bot 

[yhiaali3]

Do you believe that the HODL event is related to Trading Bot? Are you worried about their impact on BTC price and the entire crypto market in upcoming bullrun?

I am not completely sure, but I do not rule out at all that the HODL event is linked to the Trading Bot because these companies are primarily concerned with profit and often follow devious methods to achieve quick profits, so I am not surprised that they use such advanced bots that can manipulate the market.

As for its impact on the market, it is certain that it will affect the market, but temporarily and will fade with time. The reason is simply that Bitcoin has reached a stage of strength and maturity such that it is very difficult for any major event or manipulation to affect it except for minor effects that will disappear quickly.

[Trongduy]

I am not completely sure, but I do not rule out at all that the HODL event is linked to the Trading Bot because these companies are primarily concerned with profit and often follow devious methods to achieve quick profits, so I am not surprised that they use such advanced bots that can manipulate the market.

As for its impact on the market, it is certain that it will affect the market, but temporarily and will fade with time. The reason is simply that Bitcoin has reached a stage of strength and maturity such that it is very difficult for any major event or manipulation to affect it except for minor effects that will disappear quickly.

Everything has trade-offs and we accept them happily! VanEck's HODL is Bot's first step into spot ETF!

Without whales participating, the market will not explode, but if whales come in, manipulation will increase, and investors will suffer psychological blows.

Without a trading bot, liquidity is poor and the market is not vibrant. With Bots, the intensity of manipulation and price manipulation is more serious.

I'm not worried about the Bot, I'm worried about the false signals we might get from future spot ETF trading volume analysis.

[bitmover]

I don't think trading bots offer risks of manipulation or whatever.

Long term price is driven by global events, such as pandemic, etf approval, halving, persistent inflation in developed economies, and so on.

Trading bots operate in short term.

[MrSpasybo]

Everything has trade-offs and we accept them happily! VanEck's HODL is Bot's first step into spot ETF!

Without whales participating, the market will not explode, but if whales come in, manipulation will increase, and investors will suffer psychological blows.

Without a trading bot, liquidity is poor and the market is not vibrant. With Bots, the intensity of manipulation and price manipulation is more serious.

I'm not worried about the Bot, I'm worried about the false signals we might get from future spot ETF trading volume analysis.

We are forced to get used to the new normal, because Bots have, are, and will continue to exist in the financial market in any field, increasingly sophisticated: increasing capital, increasing technology, increasing trading frequency, more sophisticated strategies.

I think we just need to follow the market to follow the trend, it's not bad that Bots have the effect of amplifying the trend. But technical analysis methods related to volume analysis may need to be reconsidered so as not to be disturbed by the volume generated by Bots.

I don't think trading bots offer risks of manipulation or whatever.

Long term price is driven by global events, such as pandemic, etf approval, halving, persistent inflation in developed economies, and so on.

Trading bots operate in short term.

As I have presented: buy and sell orders continuously operated by bots can affect investor psychology at a time, resulting in changes in their behavior and investment plans. Through bots, Market Makers can adjust the price path according to their plan to create the greatest profit. I agree that in the long term, the increase in BTC price may be inevitable, but the process of increasing and decreasing may only bring profits to Market Makers, not the majority of investors.

[Stompix]

I have more grounds to worry that if Bot Trading can impact the BTC Spot ETF, it will also have an indirect impact on the BTC price on CEXs. We may already be seeing this, if the BTC Spot ETF's multi-billion $ daily trading volume data is generated and controlled by Trading Bot 

This is going to be something really weird, when it comes to our traditional CEXs and ETF, this weekend's dump has not been the only occasion on which people have wondered how would it feel if you're investing and trading a thing that is closed on weekends but at the same time you see the 24/7 markets in red and you don't have anything else you can do than leveraging the bets on a cex during that time.
ThUs defeating the whole point of why you invested more in an ETF.

As for those bots, I still think at one point we're going to see all the pieces of the puzzle falling at the right time and place and bots being more influenced by the other bot activity in the recent past thus trading against their own and driving the price either to the ground or to the stratosphere with the poor real humans watching their screens not understanding a thing. And it will happen eventually, as more bots are released in the wild and fewer traders do their own trades manually it will be a thing of chance, but either way no matter where the price will go, it will be something we will remember for a while.

[MrSpasybo]

This is going to be something really weird, when it comes to our traditional CEXs and ETF, this weekend's dump has not been the only occasion on which people have wondered how would it feel if you're investing and trading a thing that is closed on weekends but at the same time you see the 24/7 markets in red and you don't have anything else you can do than leveraging the bets on a cex during that time.
ThUs defeating the whole point of why you invested more in an ETF.

As for those bots, I still think at one point we're going to see all the pieces of the puzzle falling at the right time and place and bots being more influenced by the other bot activity in the recent past thus trading against their own and driving the price either to the ground or to the stratosphere with the poor real humans watching their screens not understanding a thing. And it will happen eventually, as more bots are released in the wild and fewer traders do their own trades manually it will be a thing of chance, but either way no matter where the price will go, it will be something we will remember for a while.

It is true that CEXs operate 24/7 while the stock market does not, but I think stock investors understand this and can accept that risk, which is why we have seen tens of billions of dollars flow into BTC Spot ETFs in the past 2 months. That is a number that shows the choice of traditional investors, they want to invest in the easiest and simplest way possible.

I know that trading bots are very popular and we have been living with them for a long time, but the fact that trading bots with large capital from the traditional market can affect us through the manipulation of BTC Spot ETFs on the stock market still makes me uncomfortable. After all, this is a free market, whoever has the greater economic and technical potential will prevail!