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December 04, 2013, 11:35:05 PM |
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I don't post that often in forums in general, but I had some thoughts on the BTC robot that has been floating around. Unfortunately since I'm a n00b I can't reply to BTC robot threads. Still, I did a lot of research--I'm not going to just hand over a couple hundred dollars and hope I don't get ripped off--and ultimately I did take a leap of faith. This was just last night when I bought their silver package, and I don't have enough data to determine whether the software will be profitable, but I feel that their logic is sound.
The software does, or is supposed to do, something I've thought about for years--if you own a commodity like a stock, you might be a day trader or a long-term investor. The latter buys a stock and holds onto it, sometimes for years, hoping to gain a modest profit as that company and the economy itself continues to grow. But the former, although with more risk, buys and sells sometimes many times a day, attempting to capitalize on local maxima and minima. What if you had a way to do this automatically? But the logistics made this difficult, if not impossible. A BTC robot connects to BTC-e via an API key to effect trades on the user's behalf based on some tested heuristic, and it sounds like it's based on the candlesticks -- assuming short-term increase or decline will lead to comparable short-but-longer-term increase or decline. If the heuristic were accurate enough, it could effect trades several times a day without user intervention, so instead of me hanging out at BTC-e for hours a day watching the latest and manually entering a buy or sell, the software would do that for me.
The system capitalizes on BTC volatility, and this is very important: if the BTC prices do not fluctuate, the software--if its heuristic is based on candlestick size--would have no action to take (unless the stable currency itself changes, discussed below). It counts on a stable currency, like $, to make a profit on. Someone in one of the threads were pointing out that though their profit increased, their bitcoins may have decreased. What about a program that maximized bitcoin? But to do that, the software would need to watch a country's unit of money instead and its exchange rate to BTC and take similar action. But, you might rightly argue, the exchange rate is relative. If you look at the chart of BTCs per USD, you could invert the axes to get USDs per BTC. But the profit will be reflected most accurately in whatever unit is the most stable. If the program claims a profit of $400 despite your BTC may have dropped from e.g. BTC4 to BTC.3, it comes with implicit assumption that it wasn't $ that suddenly dropped precipitously in value, effectively making that claim meaningless. The assumption is either that BTCs recently increased in value and the program bought enough to realize said profit, or they declined and the program sold enough. Another possibility is the bottom fell out of the American market and you have $400 of profit and $400 is the new price for a Quarter Pounder with Cheese at Mickey Dick's. But in that case, an ideal robot would have (1) seen the imminent exchange rate increased value of BTC and (2) would have bought BTC. But aside from such a program helping you out of sudden unlikely dollar hyperinflation, it explains why a portfolio's absolute BTCs could be less than what you started with and still have a profit -- because BTCs are volatile, not American currency, and that is what provides the impetus for effecting trades.
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