How SmithBot Protected my Crypto Investments during the Market Crash

The last two years in the crypto market were just a crazy roller coaster ride. The prices skyrocketed to new all-time highs until May 2021 just to crash down by ~50+%. Then, a rapid recovery followed and some of the major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) saw even higher all-time highs around November. A sharp correction and a deep crash followed with about 2/3 of the crypto market cap wiped out.

Crypto market cap (source: Tradingview)

Many crypto investors lost large amounts of money with more than 50% of all Bitcoin addresses being in the red, something that hasn’t happened for years. Since middle of June 2022 the market is stabilizing and seems to recover slowly, although it remains to be seen how sustainable this upturn will be. It is encouraging, however, that the crypto market cap is still about 4 times higher than 2 years ago, even after the latest crash.

Trading vs. HODLing

If you just held on to your crypto assets for the last 2 years you still made profits in average. Some examples:

  • Ripple (XRP) is up almost 2 times
  • Bitcoin (BTC) is up 2.4 times
  • Ethereum (ETH) is up about 6 times

if quoted in US-Dollar. However, HODLers massively lost since the price peaks within this period. The losses for the symbols above are:

  • Ripple (XRP) lost 81 %
  • Bitcoin (BTC) is down by ~65 %
  • Ethereum (ETH) lost also ~65 %

Certainly, if you sold your assets around the market peak you could have cashed in the massive profits from the 2021 rally. A few skilled and lucky traders avoided suffering big losses, but the majority of crypto holders took a huge hit. And this included many professional and institutional investors such as crypto hedge fund Three Arrows Capital and crypto lender Celsius who went bankrupt.

If even many experienced professionals didn’t get the timing for the exit right, how can everyday investors protect their gains? When the big FUD starts and everyone panics, you usually already missed the chance for selling with minimal damage. Emotions aren’t a good guidance in trading, but nevertheless most crypto investors base their decisions on non-rational triggers.

Trading Bots

Automated cryptocurrency trading bots strictly execute a predefined strategy based on data. They eliminate emotions completely. However, not all trading bots beat the market and it is difficult to find the ones that really work.

I am using SmithBot for my trading since about one year now. SmithBot provides fully automatic trading bots utilizing proprietary AI algorithms. It trades on the spot market without margin trading, so it is on the lower end of the risk scale within the trading bots on the market. On the other hand, as it opens only long trades it cannot profit from falling markets. They have perpetual futures trading on their public roadmap, so they might offer a solution for short and long trading at some point. Anyways, let me share the experience with the current spot market bots during the recent market crash.

My three bots are trading Ripple (XRP) quoted in Euro (Bot-ID 2), Ethereum (ETH) also quoted in Euro (Bot-ID 35) and Bitcoin (BTC) quoted in US-Dollar (Bot-ID 75). The performance plots showing the last 2 years extracted from the SmithBot platform are shown below. Please note that the period before live trading start is simulated according to SmithBot’s support.

Ripple trading bot
Ethereum trading bot
Bitcoin trading bot

All bots sold the crypto assets close to the major peaks thus avoiding larger losses. Although they did not always perfectly hit the optimal timing, they were usually quite close. The green curves show the base symbol gains which are a metric for the performance relative to the market: a falling curve indicates profits worse than buy&hold, whereas a rising curve mean the bot is beating the market. Overall, the bots largely outperformed the markets and delivered nice profits as seen in the yellow curves.

Given the bots trade without margin on the spot market, the best possible result in falling markets is preserving the quoted assets. This corresponds to a zero drawdown. Actually, the bots performed close to this ideal result.

  • Bot-ID 2 was down 13 % since the peak (vs. -80 % buy&hold XRP/EUR performance)
  • Bot-ID 35 was down 18 % since the peak (vs. -65 % buy&hold ETH/EUR performance)
  • Bot-ID 75 was down less than 5 % since the peak (vs. -65 % buy&hold BTC/USD performance)

Overall, the massive profits until the peak end of last year were almost conserved and at the same time base assets accumulated. This sets the stage for further large profits in the next bull market. Importantly, all bots still delivered nice positive returns since I started about a year ago despite the market crash.

Conclusion

It is difficult to find an optimal strategy in times of market crashes. HODLing causes large losses, but finding the right timings for exiting and re-entering the crypto positions isn’t easy, even for pro investors. For the majority of crypto investors, a properly designed trading bot might be the best strategy. At least for me it worked out well and fortunately my crypto assets managed by SmithBot suffered only minimal losses during the massive market crash.

Also read,

New to trading? Try crypto trading bots or copy trading


How SmithBot Protected my Crypto Investments during the Market Crash was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.