Because of the wild fluctuations of the price of bitcoin custodians risk having the value of their buy side liquidity mauled by bitcoin’s bear market.
Here’s what could be done to reduce exposure to this risk. The trading bot should keep only a small fraction of the bitcoins on the exchange at a time. As the buy wall gets eaten, the bot should automatically buy bitcoins for USD at bitstamp and send those bitcoins to the altcoin exchange. What say you?