On the 12th of Dec 2022, TapTools, a chart analysis and portfolio tracker on Cardano shared the activities, of what it believes, is an arbitrage bot on Cardano.
It appears we now have an arbitrage bot on #Cardano
1,267,157 ₳ in
1,304,603 ₳ out
37,466 ₳ profit
2065 trades pic.twitter.com/m4f79vU0fg
— TapTools (@TapTools) December 12, 2022
The reason for the suspicion that it’s an arbitrage bot is this. Since the 22nd of November 2022, the wallet has carried out 2065 trades, with a total of 1,267,157 ADA put into the network and 1,304,603 ADA pulled out. Estimating a 37,466 ADA in profit.
Arbitrage bots are programs that capitalize on the fluctuations of prices on multiple crypto exchanges. They use market information and analysis to gain profits by trading multiple financial assets. This is used to generate extra, possibly passive incomes.
Since the prices of cryptocurrencies like BTC and ETH vary across platforms and exchanges, bots have the speed and logical capacity to beat exchanges and platforms that are slow in updating their prices. Removing human emotionality or distractions from their trades.
All that is necessary is a trader who is capable of building a bot based on certain trading strategies. This bit then watches the market round the clock to execute the algorithms behind its design. And their response time is beyond whatever humans can accomplish.
Since cryptocurrencies are digital in nature, and their markets are always open 24/7, the integration of these bots is easier and it makes the markets healthier and brings in more liquidity.
Similar to a human body that exercises to make its blood flow faster, which makes them healthier, arbitrage bots speed up the flow of liquidity in a system making the system healthier in the long run. Aside from systemic health benefits, it also brings about greater inclusion in the network.
In the past, such high-speed trades were only possible for large institutionalized traders which led to an imbalance of resource allocation. But with the use of arbitrage bots, the average resource allocation spread is evening out, leading to more inclusion for individuals and smaller institutions in the network.
The presence of a bot on Cardano would also bring greater liquidity into the network. This would give traders faith that there are sufficient assets in the network, leading to better interests and can attract more big investors which would further expand the network.
All this activity and liquidity would reflect positively on the spot price of ADA on a global scale.