How Sentient Performs Better in a Bear Market
Sentient is a suite of flexible intelligent trading algorithms capable of diverse trading strategies suitable for various market conditions. This design philosophy is an essential component of the Precog cutting-edge engine that allows the AI-powered system to generate profits regardless of the state of the market.
It should therefore follow that bear markets shouldn’t act as a barrier or hindrance between Sentient and profits; but what if we told you a bear market is not only business as usual for Sentient but is actually a more preferable environment that yields better results?
How it Works
In order to understand this dynamic, there are two things we need to know: The first is how Sentient functions; And the second is what bear markets create and how that affects Sentient’s performance. For a more in-depth explanation of Sentient, be sure to check out this article we released a while back!
To summarize, Sentient’s core consists of AI-assisted continuously improving and expanding (via machine learning and experts) ground-breaking suite of DeFi trading algorithms that conduct various low-risk trades many of which fall into the definition of arbitrage. By being connected to multiple centralized and decentralized exchanges, Sentient can automate the profitable low-risk trading such as, for example Cash & Carry (aka Basis) arbitrage trades. In this example it uses current crypto pairs and their futures across various markets and ecosystems, and takes advantage of their price inefficiencies (or differentials). The more it trades, the more it improves thanks to its machine-learning capabilities. The AI analyzes past trades and their results, and makes adjustments based on all previous trading data. Additionally, as mentioned above Sentient is regularly updated for improvement and expansion by our team of experts in trading, algorithms, mathematics, statistics and probability and blockchain programming.
But how does this tie in with bear markets, and what enables Sentient to perform better under bearish conditions?
A bear market tends to see more volatility than a stable or bullish one, and this increased volatility has positive implications that benefit Sentient. This is mainly due to the increased arbitrage and other profitable trading opportunities that arise from a volatile and uncertain market. And since Sentient is capable of such low risk high returns-to-variability ratio trades, it ends up performing better under such circumstances.
This isn’t a new revelation; arbitrage and volatility traders tend to perform well in volatile markets, and our data from Sentient’s trades from the past months correspond perfectly with that fact. The analytics gathered after months of testing — which we plan on releasing in the near future — reveals how increased volatility corresponds with increased cumulative returns.
On a deeper level, one of the reasons for this is because the uncertainty and panic brought about by bear markets create more price inefficiencies due to the increased number of trades, swaps, transfers, and changes that take place in both centralized and decentralized exchanges. Sentient — being connected to dozens of such exchanges from both sides — easily spots such opportunities and acts instantly to seize them.
While holders dread a bear market (and understandably so), Sentient benefits from the volatility — and by extension, price inefficiencies — that result from the rapid, spontaneous, and voluminous trades that are common in crypto but especially in down (bear) markets. Having said that, it’s worth emphasizing that volatility isn’t exclusive to bear markets, and sometimes even bullish markets undergo periods of intense price fluctuations. Given how crypto is a relatively volatile market in itself, there is no shortage of opportunities for Sentient to capitalize on — bearish or otherwise.
For more resources on Sentient and Precog Finance, check out the links below!