Blessing or Curse: Impact of Algorithmic Trading Bots Invasion of the Cryptocurrency Market

Abstract

In this paper, we investigate the impact of the absence of trading bots on human traders' investment returns. Using comprehensive data set obtained from a large cryptocurrency exchange platform, we find that trading bots play a market-making role, and they boost human traders' investment returns. We use the natural experiment setting that transforms a heterogenous market co-created with trading bots and human traders into a human-only financial market for empirical design. This paper extends the traditional investment decision under uncertainty by considering human attitudes toward algorithms while providing significant contributions to policymakers and regulators by providing empirical evidence on trading bots. © 2022 International Conference on Information Systems, ICIS 2022: Digitization for the Next Generation. All Rights Reserved.