Every time the cryptocurrency market attracts many investors, the huge confidence in the market is also when crypto scams increase rapidly. The number of scam coins and projects that promise unbelievable profits has also increased. Scammers are increasingly targeting inexperienced traders with so-called sophisticated trading software and trading bots.
How scammers use Trading Bots as bait for high profit investors.
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Trading bots is a phrase that investors will hear quite a lot when participating in the financial markets. Because of the financial outlook and the call to trade bots guarantee winning and lossless trades many traders Inexperienced crypto translators are losing money to these sophisticated scams.
For example, the masterminds behind South Africa's notorious Mirror Trading International (MTI) were able to scam tens of thousands of people after they repeatedly assured investors that the company had a sophisticated trading bot. vi executes transactions automatically and earns very high even when they are not there. As evidence that MTI was in fact a scam grew, the key figures behind the company, CEO Johann Steynberg, suddenly disappeared along with investment funds before investors knew. I have been cheated. As subsequent investigations have shown, that much-vaunted trading bot is nothing but a fraudulent tactic designed to defraud investors. MTI has never produced high returns for its investors because it was never a genuine investment company from the start.
Next, Africrypt, another South African bitcoin trading company, similarly claims that their trading bot will generate unusually high returns for investors. However, like MTI, Africrypt fell apart when two of their young directors disappeared. While investigations into the demise of Africrypt are ongoing, preliminary findings suggest that the trading bot narrative is once again just a ploy used to defraud unsuspecting investors. suspect.
The lure of a magical return
Smaller criminals are also using the story of trading bots to defraud inexperienced and uninformed investors. They do this by convincing investors to buy software or trading bots that they think will generate returns in excess of 100% in a short period of time. Usually scammers will use social media channels to target their victims. Many unsuspecting traders have fallen for this even after being warned.
With the trading bot scammers still lurking, many traders will continue to lose money to this type of scam. This begs the question: Who should use a trading bot? How to tell if a trading bot is actually a scam? For answers to these questions and more, Bitcoin.com News reached out to Dmytro Volkov, CTO at CEX.io.
In his written answers, Volkov admits that some trading strategies require quick actions and calculations. He said since humans cannot execute such trading strategies, this task was given to a trading bot. However, according to the CTO, “the most successful trading strategies still require constant supervision and guidance from experienced highly skilled human resource traders – traders”.
Bonus trading similar to driverless racing
To illustrate his point, Volkov uses the analogy of a Formula 1 racing car, which may be one of the fastest cars, but of course, still requires a skilled driver. In addition, the trading bot will also work well under certain conditions. Volkov explains:
Automated trading bots are uncommon and work well for some specific market situations and often work well for short periods of time, unable to adapt to significant market changes.
So while some traders may consider a trading bot as an “autonomous intelligent self-learning program” that remains effective for months or even years, according to Volkov, such a bot does not exist. in. However, in the case of using a trading bot, traders should be prepared for two possible outcomes, either they make a profit or they lose money.
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The idea of this risky bot trading is supported by the Kucoin team, as well as the CEO of Naijacrypto, a Nigerian crypto exchange. In written replies to questions submitted by Bitcoin.com News, Kucoin representatives agreed that although traders can transfer funds to the trading bot platform, someone still needs to work. platform for “operating trading software to gain profits for investors. . In any case, this method of trading comes with risks, the Kucoin team was quick to point out.
Scammers selling Bots
In another (perhaps less risky) scenario, the Kucoin team also outlines how to use a trading bot to generate positive profits for users:
Investors put their funds into the exchange, and the third-party trading bot platform links to the exchange via an API. Therefore, the third-party platform has the right to manipulate the user's account without the user's knowledge, such as buying and selling coins in the user's account.
However, this only happens with genuine trading bots, the Kucoin team asserts.
Unfortunately for traders, 99% of those selling bots are scammers, said Chiagozie Iwu, CEO of Naijacrypto. However, this is often not immediately obvious to their victims. On the other hand, people with successful bots don't need to sell them for meager amounts, Iwu argues. So how to distinguish between genuine bot and fake bot?
According to Iwu, the most obvious and perhaps best gift a trading bot can offer is a scam should be claims of “unrealistic profits” which can never be consistent. “If they make such a constant profit, then the math shows that they don't need to sell bots for such a small amount,” Iwu emphasized.
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Verifying the Authenticity of a Trading Bot
A scientific way to determine if a bot is real is to use trading records to prove whether a trading strategy has been implemented. For example, Kucoin says users can check every order they've made in their own account to prove it's a real transaction. However, if the exchange uses a third-party platform, a trader can ask the exchange to provide transaction details to prove authenticity.
Alternatively, traders can develop their own strategies and have someone convert them into bots, Iwu suggested. He said: “A trading bot can be written around an indicator. However, this is very common in the traditional stock markets and only very few exist in the crypto market.” The alternative is to choose trading software that offers newbie-friendly trading strategies.
The above information has greatly reduced the chances of traders - especially inexperienced ones - being scammed simply by stepping back and reviewing all offers with a critical eye. Understanding these basics means that when someone is offered the opportunity to invest in a risk-free and guaranteed high-return trading bot or a bot that is fully automated and requires no skill supervision - they would be able to say that it is 100% a scam.
Have you used a trading bot? What is your experience? Let us know in the comments section below.
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