I made a trading bot that was moderately profitable, until the exchange it was using got hacked and lost all my coins :/

Edit: The source is available if anyone's interested. I intended to do more with it, but lost steam after I lost my coins. https://github.com/nfriedly/Coin-Allocator

BTC-E?

No, cryptsy.

Did you join in the class action lawsuit?

No, I don't think I even realized there was one. It's okay, thought, I only lost about $100. (I kept the balance low mainly because I didn't trust my own code yet.)

To answer your question: Yes. The volatility is a trader's dream.

I've been holding a sizeable Bitcoin position[1] since 2011, but I'll acknowledge you can make a killing trading in bull markets or crushing bear markets.

[1]: https://news.ycombinator.com/item?id=2612486

To my anecdotal experience, more like a market makers dream. If you do speculative HFT then for the unexperienced you may get crushed by huge slippages when exchanges crumble under a load. Notice that exchanges in the Bitcoin world either do not, or simply don't care, to guarantee availability during spiked trading. I don't say alpha is impossible, but probably requires certain degree of comprehension.

What's the best way to take a bearish position on Bitcoin? I looked into it during the price surge a few years ago, but couldn't find anything that didn't involve setting up non-USA accounts. Any secure ways to do this for US citizens?

CME offers Bitcoin futures[1], available for trading via Globex. It's a futures contract, so you won't hold any BTC position (long or short), and it's actually cash-settled, so you don't have to worry about delivering or actual BTC.

However, margin will be steep, considering the volatility; my broker in particular actually has a $200k overnight margin requirement for a short position.

I'm sure you've heard the saying that the market will remain irrational for longer than you can remain solvent. Please keep that in mind when shorting bubbles.

[1] https://www.cmegroup.com/trading/equity-index/us-index/bitco...

Awesome, I'll look into. Are you able to quickly buy/sell contracts whenever? I can live with market-timing risks, but not with risks outside of my personal decision control (e.g. i want to sell a futures contract but the platform says I can't for w/e reason, or they can't find a buyer, etc)

Yes. These /BRR contracts trade on Globex like most other futures contracts, meaning around-the-clock (23/5) trading. Liquidity is fine for single contracts in the front month -- bid/ask spreads are one to three ticks, and you won't have any problems getting filled. If you're trading tens of contracts, you're going to move the order book somewhat, but I'm assuming your volume isn't at that level. Like any other tradable instrument, you run the risk of slippage in volatile situations, e.g. a stop loss hitting during a big liquidation event. Since you appear to be willing to hold a short position for a long time, this shouldn't be an issue for you.

Exchange (that is, Globex) availability hasn't ever really been an issue (and I can't remember the last outage they had; it'll be a big deal, considering there are literal trillions in notional value swapping hands every day). Your broker, which will be your gateway to actually trading the contracts, will be the bottleneck of availability.

I personally use Interactive Brokers, and their uptime is great. Even during times of extreme volatility this year across many markets, which caused the likes of Robinhood or even more established brokers like TD Ameritrade to experience downtime, IBKR has been fine. Obviously your mileage may vary and I suggest you do your due diligence on brokers.

Another way to do it is by borrowing bitcoin with other collateral, selling it, then buying it back at a cheaper price. You can get a sense of rates here: https://defirate.com/loans/

So you might supply USDC on Aave and borrow WBTC. You can then trade that WBTC for USD (if you're bearish on BTC relative to USD), wait for the WBTC price to drop, buy it back and repay your loan.

Though if you're wealthy enough to trade the futures, it's taxed more favorably and easier to manage.

May I ask for recommendations on where to trade Bitcoin? The fees on Coinbase (Pro), Kraken, etc seem prohibitive to me, especially for larger sums.*

*) I‘m used to commission free stock trading with no volume limits in Germany, for any private individual. Don‘t know how this handled in other countries though.

For low volume, manual purchases, Robinhood is comission-free. If you want to make a bot and need an API, there will be fees.

Is it really free or is there a bid-ask spread?

For example, if you buy 1 BTC and then immediately sell it, will you get the same number of dollars back?

No market anywhere can offer that

Yes, but don't waste your time with American exchanges, the regulations are too burdensome. Bitmex actually maintains a high score section, a lot of people are doing extremely crazy things trading in the crypto space https://www.bitmex.com/app/leaderboard

As a legal citizen and with regular bank, coinbase was super easy. It was barely an inconvenience unlike the old days when trading really dodgy coins

I had Bitcoins in 2013 back when it was $50 and then lost them daytrading on margin at BitFinex. Would have 500x my money in several years.

Listen the rule is simple:

1. After a crash, buy BTC and just forget about it until some alert that BTC has exploded 5x or more

2. If BTC had a big run up, buy ETH instead

3. If ETH had a big run up, next buy XRP

4. If XRP had a big run up, then escape into tethers and wait for crash

Repeat :)

If you did this sequence the last few times then ONE bull run nets you 5 x 5 x 5 returns!

To be fair, if you brought $50 Bitcoins in 2013, you would have 380x your money today by doing nothing.

I'm sure your trading strategy is sound, but it's still a lot of work over the years to get the 500x gain, vs the 380x gain from just doing nothing.

(This comment is in jest. I realize "500x" is a figure of speech and not meant as a literal claim of performance.)

@inversebrah

hahah, was going to say the same thing.

Yes. Just look at the 3Daily chart of BTC/USD. It's absolutely bonkers

Weirdness is good. If the market is weird, it means people don't know how to exploit it, i.e. you actually have a chance of finding an edge that hasn't been exhausted by someone else.

There isn't a compendium of standard tactics that "work" in normal markets. If there were, they would no longer be profitable. Anything that works is secret & novel, and finding a novel approach to an old market is harder than finding a novel approach to a weird one.

Yeah, created a bot that just trades the 1D MACD on Ethereum on a point & figure chart crossing up. Ridic how profitable this is. Proof is backtest on tradingview.

Nope. But when the volume and volatility is high like it is right now, it can be profitable to be a liquidity provider instead. It's actually very easy to provide liquidity to Uniswap and other decentralized such as Curve.fi - both have bitcoin-paired pools.

I have a friend who had a bot that was front running users when the Kraken trading engine was much slower....his bot stopped working when Kraken updated the engine though.

You don’t mean front running. That’s a term of art in trading that means a specific thing. That is, trading against someone’s position you know in advance and you have a fiduciary duty on their behalf (e.g. your brokerage trading against you).

Sure, maybe just simple arbitrage. To tell you the truth I don't know the exact details. Of course he wasn't doing anything illegal (I wouldn't write about it), he didn't have any special access to the exchange

Lately it's become fun again. Huge swings day to day and even hour to hour