I think markets are quiet because of grid trading bots
Image source: https://www.binance.com/en/support/faq/what-is-futures-grid-trading-f4c453bab89648beb722aa26634120c3
It seems like every exchange nowadays have grid trading bots. Grid trading bots add a lot of liquidity for the market, but reduce the volatility.
A grid trading bot adds buy and sell orders automatically in certain levels. To illustrate it, imagine a coin is worth $100:
A grid trading bot, just to illustrate, will place multiple buy orders below the price of $100 and multiple sell orders above $100
So the grid looks, for example, like
- $102 sell
- $101 sell
- $100 current price
- $99 buy
- $98 buy
If the price goes up they short, and if it goes down they long. They keep updating the grid. With thousands, maybe millions, of people with access to grid trading bots I imagine it would make it very very hard to move the prices.
The least the price move, the tighter the grids become, to try to squeeze more profits, and the tighter the grids become the harder it is for the price to move.
But of course, no trading strategy is flawless. Eventually the price may moves outside of many grids and unfavorably to most positions and that may possibly liquidate en masse.
If the price moves fast enough there may be mass liquidations and that is what would destroy many grid trading bots, but would eventually get the markets into a trend, updwards or downwards, or possibly even a wickoff.
It is all speculation from me, but it makes sense to me that because of how easy it is to set grid bots, or make your own grids yourself without a bot, that is making the markets go sideways.
It has happened in the past though that Cryptos went months, years, without moving, even when markets were less mature. So the easy of setting grids may be unrelated. In that case, it is just a curious reflection.
I don´t think that they have a big impact on the price, they just provide additional liquidity. The tighter the better, because the spread is then lower. I would not consider them as harmful. They profit from the spread difference, but their owner has also the risk of getting wrecked in case the price moves out of the range.
Yes, it might not have a big impact. The big banks have always done that and seems like that is how they can keep consistent profits while most traders fail.
It is unfair that the more money you have the more you can profit, because when you have enough money your liquidation price is so far away you basically never lose (but when you do it is catastrophic)
You are pursuing a different strategy. I like that :) People are afraid to dare and then ask those who dare how they make money. I wish you success.