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Trading strategies for running crypto bots in the year of the halving

7 May 2020

4 min read

You’ve heard that the halving is coming, we are not writing to notify you about that. We’re here to look at some of our trading strategies to make the most of it. Using trading automation and running a crypto bot may prove essential if we want to make the most of this halving.

There seems to be a misconception that the effect of the halving will be a one day event, but that couldn’t be further from the truth. In fact price experiences a lot of volatility on the days around the halving, with the biggest appreciation happening months after the event.

Source: Investopedia, Coin Metrics Network Data Pro

If you would prefer to execute the trades yourself it will be essential that you are running crypto bots on paper trading so you can receive notifications on the market conditions you are tracking

This is what we are looking at for halving and post-halving trading strategies:

Too long don’t wanna read – The halving checklist

With countless ideas and hype around the event here is a short list to keep you focused: 

It’s not the first time that Bitcoin’s block subsidy gets cut in half (in fact it’s the third) and so you should be able to research what happened prior and post the previous halving events, and create your strategy according to your research.

When you land on an trading approach you’d like to look further into, backtesting your strategy on historical data is available for you in CLEO.one.

Create a bitcoin trading plan

Identify realistic goals they say… Or at least identify which signals you want to be looking at. It might be a good idea to start by checking out the Favorites section in our Builder for some inspiration. 

Good place to start can be testing any of the following:

  • Increase in Crypto Total Market Cap
  • Increase in Crypto Total Volume
  • Increase in Bitcoin Dominance
  • Increase in Alts Dominance

Build trading volume for BTC and alts in your crypto bots 

Big price increases in crypto markets are predicted by volume. As Bitcoin already made major moves these past few weeks, this strategy can help us capture gains in big cap Altcoins like ETH, LTC, etc… Including an SMA crossing, ensures that we are capturing upward momentum.

In our example you can see we’re trying to capture 20% of upward move in ETH/USDT, while having our downside protected by stop loss in form of 10% market price or be out of the market if BTC starts to go down – whichever of these three events happens first.

Plan your stop loss and close condition

Halvings have been known to increase and then sharply decrease BTCs price before another push in price. At what levels would you like to abandon ship? This is your close condition or Stop Loss level. An example of the close condition is already mentioned above, Stop Loss can be expressed as a percentage as well.

Even simply buying some Bitcoin can be a great strategy as you expect a bullish run to new all time highs. Set your Stop Loss and close condition to protect you from a sharp drawdown and wait for the halving and months after. 

Monitor equities with your crypto bots

Bitcoin price has been somewhat correlated to the stock market. In case there is strong negative sentiment in the stock market, crypto markets may be affected as well. It’s wise to select a sharp reduction in price of a major stock as a close condition in your crypto bot. 

In CLEO.one you can set up correlations between crypto and other assets like equities easily. Given that these are peculiar times for all financial markets, it can be desirable that your crypto bots reflect what is happening in traditional markets. In this particular example we chose AMZN, as if there is a rapid drop in its price Bitcoin would be expected to follow suit.

If you would like a more detailed description of trading strategies for trading in times of uncertainty it’s worth looking into this guide.

Happy halving!