Copy Trading in crypto— pro’s, con’s and what to look out for.

If you’ve spent a reasonable time in crypto you’ve realized that this space is full of manipulation and asymmetric information being shared amongst few select individuals.

There’s so much insider trading and information exchange happening in crypto (which is illegal in TradFi) that the average retail investor sometimes feels like a sardine in a huge bait ball of other retail sardines that gets eaten for lunch by the sharks and whales.

Some sharks and whales have insider connections to developers and builders, but most of all they have on-chain intelligence — a huge library of labelled wallet addresses of other influential capital in this space, tools and trackers that alert them when big moves happen and access to dashboards that signal when to enter and exit certain assets.

So what to do if you happen to possess none of these?
Sure, you could grind many hours downloading transaction histories of many successful launches, single out who was early most of the time, searching for duplicate wallet addresses and see who has made the greatest profits over time on tools like Zerion.

OR what a game changer would it be to be able to copy the trades of these traders?

I know what you’re thinking, but hold your horses. Let’s first put that thesis under a microscope:

PRO’s

• profit from more skilled traders than you are
• your incentives align — the copied trader wants what you wants: profit
• save time and effort researching promising new projects
• get potentially better entries & exits to projects and thus sleep better at night
• profit from possible insider knowledge & asymmetric information

CON’s:

• you outsource your decision-making to a complete stranger — you don’t know if he/she has done the same due diligence you’d have done
• nobody knows how the markets will behave, not even the best trader of the world, so volatility can be expected
• your copy trading can potentially be found out by the wallet owner (it’s all on chain!), thus making you the target of his/her manipulation (except if you frontrun your target successfully, more on this later.)

So it all comes down to picking the right trader or bot to copy (shocker, I know!).

So how do you find good traders to copy?
This is a question for a whole other article, maybe I’ll find a time to post about this next.

But let’s resume with: “How would efficient copy trading even be technically possible? I’m not a developer. I don’t know how to code such software.”

Fret not — AnySniper has just recently built such a feature into their trading dapp.

Up until 11th May ’22 Anysniper was mainly great for sniping new token launches, but now there’s this new subcategory in the dapp called “Copy Trading” and the user interface looks like this:

UI for the copy trading feature of AnySniper’s trading dapp

Let’s take apart what we can see and do here:

1. First of all, under ‘Targets’ you add a ‘target’ which is basically a wallet address and give it a recognizable name. The dapp let’s you select multiple ‘targets’ to copy, which can be a good diversification strategy depending on one’s risk appetite and also for trading on multiple chains (like ETH and BSC for example).
2. On the right side under ‘Accounts’ you can create separate wallets potentially copying a single target with multiple wallets.
   This is particularly useful if your target usually buys microcaps/shitcoins that have a maximum wallet allowance for a token.
   Another utility could be that you’ve identified several targets who purely trade in certain crypto ‘genres’ (microcaps, someone trading mid-cap projects that have an upcoming catalyst, etc.) and you want to split these strategies, also good for clean performance analysis afterwards.
3. After you’ve spotted your target you can exclude specific tokens the target trades that you want to ignore such as stablecoin swaps or all tokens the target already owns to concentrate fully on newly launched tokens i.e.

4. Now to the fun part — configuration. Let’s look at the most interesting buttons here.

• Frontrunnning

Get your seatbelts ready, this is wild.
If you tick Buy Instant and set the Frontrun Gas Multiplier to more than 1, the dapp will frontrun the target’s transaction. This also goes for selling.
This right there is the most devilish weapon in the arsenal of a sniper.

Just imagine the possibilities here.

Some that immediately come to mind are copying influencers and callers making sure to get in (and out) before their followers do or even copying other (more successful) snipers and their bots (NFA though).
With this it really becomes a cat and mouse game on a whole other level.

• Buying & Selling

The dapp gives you a lot of room to configure your strategy.
1. You can buy the same exact amount of tokens your target trades — if you happen to overlap with your risk management and size of your bankroll.
2. You can buy a limited quantity of the token equivalent to a desired amount of ETH/BNB etc. — for more risk-averse plays and to build up one’s own bankroll.
3. When selling, it also lets you sell tokens proportionally to the target’s position size. So let’s say you own 100 tokens and the target owns 1000 of the same token. If he/she sells 100 tokens (=10%) the dapp will sell 10% of your tokens (=10 tokens).

There are more intricacies to explore here, but this general setup gives you first idea of what is possible.

WRAP UP

The upside potential for copy trading in crypto is huuuuuge especially with a frontrunning mechanism like in AnySniper’s dapp.
But of course it is a potentially dangerous play as well, you are trusting a complete stranger to take lucrative investment decisions for you.
It is advised to closely monitor your target’s actions especially in the beginning before you verified that your copytrading strategy is indeed profitable.

Luckily several features in AnySnipers dapp limit the downside risks / volatility of copytrading such as setting a custom amount to buy, frontrunning buys & sells of your target and excluding specific tokens from copytrading.

The possibilities this opens up to the average retail trader is truly exciting and I can’t wait for the first success stories of the community profitably copytrading professional traders.

*** At the time of writing the copytrading feature of the AnySniper dapp is accessible for holding SNIPE tokens worth 1 ETH which seems to be an introductory price subject to upward correction. ***

Visit: https://www.anysnipers.com/ for more information on the project.
To try out the dapp, check: https://t.co/hS3qDEWrNW
For the latest updates, see their Twitter: https://twitter.com/Anysniper_
If you want to join the community, check out their telegram:
https://t.co/g1HYZ17qvQ