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Trading Multiple Assets and Marketcaps
Onboarding
June 10, 2022

Trading Multiple Assets and Marketcaps

Quick heads up to our bot creators when selecting trading assets for their bots. To maximize the AUM of a strategy, it is important that you select assets that have similar liquidity!

TradingMultiple Assets and Marketcaps

 

To understand this, let us first understand the BOTS liquidity model. Selling large positions in illiquid markets leads you to influence the price. The selling pressure causes the price to drop, which is disadvantageous for your trade. In the worst case, during a market crash, you end up stuck in your position while you see the price tumbling down.

 

To prevent this worst-case scenario and ensure that your bots can maximize profits, BOTS uses the liquidity model to decide the max AUM that a bot can have. The max AUM can go up to the millions, but this entirely depends on how your bot distributes its trades and what coins it trades in.  The ultimate goal here is to maintain our quality standards, protect our users’ and maximize the profits your bot can generate based on its particular strategy.

 

In practice, when your bot sends BOTS a signal to execute a move, our system will automatically check if the market your bot is trying to trade in is liquid enough and meets our standards. So, when there is a big market crash, your bots will always be able to exit their positions quickly while minimizing slippage.

 

 

Selecting the right assets for your bot

 

Now based on the above information, let us look at an example to see why it is important to select assets with similar liquidities for bots trading in multi-assets. Imagine you have a bot with base asset USDT that trades BTC andSAND. BTC is the most liquid asset and hence will tolerate bigger orders (as a result a bigger market cap) than SAND, before experiencing massive slippage.This will mean that the strategy will have a smaller AUM cap than what BTC would tolerate. In this situation and to maximize the AUM of the bots, we recommend building 2 separate bots. Alternatively, if the bot is trading inSAND and AAVE instead, the max cap would not be greatly affected as both assets have similar liquidity.

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