Kelp - The ultimate market making bot

Kelp - The ultimate market making bot

By Answerly app | Answerly | 1 Feb 2021


Arbitrage 101

Not exactly a trading 101, this discussion, but we feel it is absolutely essential to recap arbitrage. It occurs when one security is purchased in one market but sold for a higher price in another market, at the same time. It is something traders try to take advantage of frequently, and is far from illegal, in fact, something that is even encouraged in countries like the USA. You must be wondering about the relevance of this information here, right? Let us state it clearly here that arbitrage opportunities exist in the crypto world as well. This usually happens when the bid price for a particular crypto asset on an exchange is higher than the asking price on some other crypto exchange. It is all about minting profit, and market makers have an important role to play in this merrymaking. Only in this case, market making is provided by bots, and one such bot that can help you benefit from arbitrage opportunities is the Kelp bot

Kelp bot: an introduction 

From here onwards, “Stellar” users are going to enjoy this discussion more than other coin geeks! You see, Kelp is a free & customizable open-source trading bot for SDEX i.e. Stellar Decentralized Exchange. However, don’t let this give you the impression that the Kelp bot won’t work for other centralized exchanges. You can put a tick against the like of Binance, Bittrex, and Coinbase Pro. You can use the Kelp bot to your maximum advantage, all that you have got to do is stay cognizant of the opportunities coming your way. Let us explain this with the help of an example. Suppose that the BTC prices are falling on Binance, the famous BTC exchange. What is this information asking you to do? Set up a bot to decrease the price on SDEX, thereby enabling you to mint profit in such trades. 

There is more that you can do with the Kelp bot! 

That is right, a user can use the Kelp bot to create liquidity for Stellar tokens trading on SDEX’s like StellarX. For those of you who are not too well acquainted with the concept of liquidity, it refers to the ease with which assets (talking about the crypto assets here) can be traded without bearing any influence on their prices. Liquidity is directly proportional to price stability, you can make further inferences from this rule of thumb. Similarly, Kelp bots are an effective tool for market making as well. 

Compatibility

 The glare of its features got you? We get you, it is only natural to be curious. In these lines, we explain how you can set up a Kelp bot. Firstly, please note that it is available for all desktop platforms. So please, don’t waste your time asking OS specific questions. If it is the latest release of this open-source code that you are after, you can have an update on the Github page of Kelp. On the other hand, if someone among you is big on programming, and wants to compile directly from the source, use Bash Shell in case you are using Windows. Unfortunately, compiling is not the subject matter of this discussion, so we will skip the nitty-gritty for now.  

Are there any risks? 

The biggest risk that you are likely to counter while using Kelp bot has to be the factor of asset volatility. Those who are well aware of the norms of the crypto world know already that some crypto assets tend to be more volatile than the rest. Hence, the chance that the users might lose their money is always there, something which cannot be ignored at all! It is advisable to do proper research before bot deployment. An ideal way to kick start this research would be to have a detailed look at the token’s webpage. Another important factor that must be kept in mind is the transaction cost. Trading fees can seriously undermine the profit that one might be hoping to make via trading. So, one cannot be forgetful about this aspect of trading either.

Learn to earn

Sounds easier than done! We know that most of you are in a ready steady position to go and mint money with the help of friendly Kelp bots. But it won’t be smooth sailing from the start. In fact, it would be better for the novices to start with walkthrough guides that cover basic topics like market making for a stable coin. ICO sale and creating liquidity. And with that word of advice, we bid you farewell from this discussion.

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