What Are the Major Types of Strategies Being Used in Crypto Market-Making Bots?

[smithtaylor]

Spread Strategy:

Bots place simultaneous buy and sell orders at slightly different prices, profiting from the spread between the bid and ask prices. This helps maintain liquidity in the market.

Rebalancing Strategy:

Bots constantly rebalance asset holdings by buying and selling based on market conditions, ensuring that the portfolio remains balanced while capturing price differences.

Ping-Pong Strategy:

The bot sets a buy order and, once it gets filled, immediately places a sell order at a higher price. It keeps “pinging” between these two actions to generate small, continuous profits.

Time-Weighted Average Price (TWAP):

This strategy divides large orders into smaller ones, executing them over time to avoid sudden price impacts and reducing the risk of slippage.

Grid Trading:

The bot sets predefined price levels (grid) and places buy orders at lower levels and sell orders at higher levels, capturing profits as the market moves within the grid.



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[PureMagicEvents]

Crypto market-making bots use several strategies to make profits by providing liquidity in the market. Here are the main ones:

1. Spread Trading:
   Bots place buy and sell orders around the current price and earn from the difference (spread) between those prices.
2. Statistical Arbitrage:
   Bots analyze price patterns between different cryptos and trade based on expected movements to profit from the differences.
3. Inventory Management:
   Bots keep a balance of buying and selling orders, so they can always trade without being stuck on one side.
4. Mean Reversion:
   Bots buy when prices are lower than usual and sell when prices are higher, expecting prices to return to the average.
5. TWAP/VWAP:
   Bots break up large trades into smaller ones to get better prices and avoid big market impacts.
6. Market Depth Monitoring:
   Bots watch the order book and trade based on where big buy/sell orders are, aiming to profit from these movements.

These strategies help bots make small but steady profits in the crypto market.