The crypto market has significantly rebounded following Sam Bankman-Fried’s exchange FTX collapse in November 2022. After hitting a two-year low of $796 billion a few months into the implosion, the crypto market cap has since clawed back some ground, hovering above $2.25 trillion as of October 2024. 

A new breed of tools has emerged to power high-frequency trading operations amid this resurgence. Enter the world of crypto sniping bots, where traders can turn a few dollars into millions within days. For context, Arkham Intelligence recently highlighted how three adept crypto investors snipped SatoshiVM (SAVM) at launch and made a staggering $1 million each within 12 hours. 

Unfortunately, not everyone hits gold with these tools. Beneath AI-powered trading bots that serve as token snipers lies a dark side people rarely talk about unless they are victims. This article highlights this matter in detail, including how to avoid potential scams and pitfalls 

What Is a Sniper Bot?

A crypto sniper bot is an automated trading tool designed to buy early-stage tokens at ground-floor prices immediately after they hit the market or their liquidity is added to a decentralized exchange (DEX). The bot actively monitors the blockchain network to execute buy orders as soon as the tokens are available, often before other market participants notice, helping investors to capitalize on the initial price volatility. 

The Allure of Sniper Trading Bots

The allure of advanced crypto-sniping platforms like Noti lies in their ability to spot potentially lucrative opportunities and seize them before everyone else. At their core, these tools feature several innovative functionalities making this possible, including: 

• Greater Speed and Accuracy

A web-based or Telegram sniper bot can execute trades at lightning-fast speed, often in milliseconds, to secure the best prices before the market is rattled. Moreover, the tool can monitor real-time market data and react to situations faster than humans, and with greater accuracy, which can make a difference in a market where volatility ensues without notice. 

• Ability to Operate 24/7 

Unlike human traders, bots can operate and execute profitable trades around the clock without needing sleep or breaks between sessions. This means they can seize opportunities as they arise at any time of day or night, ensuring a more consistent trading culture and a high likelihood of profitability as no chances are missed. 

• Customizable Options 

While crypto sniping bots are generally automated, users can customize them to match their trading strategies and risk appetite. This enables investors to respond to sudden market shifts swiftly amid unpredictable price fluctuations. Additionally, this functionality allows users to proactively manage risks through predefined rules and parameters, such as stop-loss orders. 

• Reduced Human Risks 

An automated sniper trading bot eliminates the human aspect of trading by executing buy and sell orders based on real-time data and predefined parameters. On the other hand, manual trading exposes investors to fatigue, stress, fear, and greed. This can lead to emotional bias, poor trading decisions, and often, unintended losses. 

The Dark Side: Scams and Risks of Sniper Bots

Crypto scalping bots and other tools for buying hot tokens have become indispensable in the industry, with trusted data sources estimating 1,395,042 on BSC that bought tokens worth $18,720,447. However, as mentioned earlier this is just one side of the tools. The other one is mired in scams and fraud as highlighted below. 

Common Scams in Sniper Bots

Traders who leverage a Solana sniping bot or dedicated tools for other blockchains are exposed to various pitfalls, including: 

• Online Scams 

According to New Zealand’s Financial Markets Authority (FMA), online videos promoting dubious sniping or Maximal Extractable Value (MEV) bots have increasingly become common in the industry. The regulator said scammers often create YouTube channels and publish AI-generated videos advertising how sniper tools can yield unrealistic gains of over $1,000 per day from a relatively small crypto holding. 

Per FMA, users are enticed to download these tools, which contain malicious code that drains wallets once connected, leaving victims counting unimaginable losses. 

• Rug Pulls 

Blockchain analytics platform Lookonchain estimates that over two million crypto investors have lost their funds to rug pulls, which involve teams raising money from users before shutting down quietly. Once token sniper has purchased tokens, unscrupulous developers may “pull the rug on them,” leaving them with millions of coins that are nearly worthless. This scam can occur in various forms, including liquidity withdrawals, pump-and-dump schemes, fake projects, and team exits. 

• Phishing Attacks 

While crypto phishing attacks have recently declined, they’ve become more costly, imploring investors to be vigilant. Data insights indicate that 9,145 victims incurred a combined loss of $66 million in August 2024 alone due to crypto phishing attacks. This scam involves a type of data theft that leverages sophisticated social engineering tactics and attack vectors to gather wallet information from unsuspecting investors. This can include private keys or personal details, which scammers use to drain the associated wallet. 

• Impersonation Scams 

The U.S. Federal Trading Commission (FTC) notes that scammers can impersonate well-known companies like Amazon, Microsoft, or FedEx to target crypto investors, including those who leverage sniping tools to trade. Once you’ve amassed a sizeable profit in your trading wallet, these scammers might trick you into believing that your account is compromised and ask for crypto to fix the problem. This can be done in waves until the entire wallet is drained.  

Real Stories of Sniper Bot Failures

In addition to exposing crypto investors to scams, token sniping tools are also susceptible to failures, leading to unintended losses that can pile up to five figures quickly as captured in these real-life stories: 

• How an MEV Sniper Bot Lost $400,000

Arkham recently highlighted how a sniping bot malfunctioned in 2023 and lost over $400,000 belonging to the users who had sent it funds. Users had committed 240 ETH to the bot, inclusive of bribes to be included as the first transaction in the block. While the bot acted quickly, its misconfiguration caused it to send 160 ETH to the wrong Uniswap V3 pool, bringing everything to a sudden stop in under a second. The only winners in the transaction were validators, who claimed and retained the bribes, amounting to 80 ETH. 

• How a Token Sniper Lost Their Mother’s Life Savings 

In 2022, a crypto trader confessed how they lost their mother’s entire life savings ($30,000) after trusting a wrong sniper bot Telegram. According to the confession, the trader’s awful escapade began when they aped the savings into a “shitcoin” that rapidly went from a market cap of $2 million to $350 million before the coin plunged. 

To salvage their losses, the trader approached a sniper bot developer, who sold him a dubious tool that turned out to be linked to a phishing website. “I then watched as my wallet was drained within seconds,” the trader lamented. “My mother has forgiven me but I will never forgive myself.”

Government Regulations and the Legal Landscape

Crypto sniping bots have raised various regulatory and legal concerns, especially in jurisdictions that prioritize user protection laws and frown upon market manipulation risks. With that in mind, it will help if you watch out for various regulations that can impact how these tools operate in your country. 

Relevant Regulations to Watch

Data privacy and protection laws are among the top regulations to watch out for, especially if the bot gathers information online to formulate and execute trading strategies. For instance, the European Union’s GDPR might require the tool’s developer to demonstrate compliance with various principles, including accountability, transparency, storage limitation, and others. 

At the same time, crypto snipers should also watch out for securities laws in their countries, especially when trading tokens that may mimic the characteristics of a security offering. In the U.S., the Securities and Exchange Commission (SEC) has tried to attach the security label to various cryptos, including the second-largest by market cap, ETH. 

How to Avoid Scams and Pitfalls with Sniper Bots

Inasmuch as token sniping tools can be dangerous, there are various ways to avoid becoming a victim of scams and pitfalls, which can wipe out all your hard-earned capital plus profits. All it takes is to stay vigilant and follow best practices for safe sniping. 

Best Practices for Safe Sniping

For starters, you might want to do the following if you’re going to be safe in an industry where scammers target token snipers with sophisticated attacks: 

• Conduct due diligence: It will help if you research the bot thoroughly to ensure it’s not a malicious tool. Check out testimonials and user reviews to understand what you’re about to download before it drains your wallet. 

• Test your sniper bot: Some scammers are too good and their malicious code may fly under your radar even with due diligence. With this in mind, you might want to test the tool with smaller amounts before risking a bigger capital. 

• Be wary of phishing emails: Phishing attacks perpetrated through social engineering often begin with dubious emails. Avoid clicking on any links sent with these emails to stay safe. Even better, ignore such emails and delete them from your inbox immediately. 

• Leverage a tool with additional protection features: Tools like Noti can snipe hot tokens while providing ongoing protection against prevalent crypto investment risks like rug pulls, front-tun attacks, and DeFi fraud.  

How to Make Money with Token Sniping Safely

Have you heard of stories about token snipers becoming overnight millionaires? Well, they’re not fairy tales and you can also turn a few dollars into a fortune if you know how to snipe early-stage tokens safely without risking your capital.  

Steps to Profit with Sniper Bots

Follow these steps to enhance profitability chances with sniper bots: 

• Install the right bot, especially one that can be deployed via Telegram for enhanced accessibility and engagement. 

• Conduct technical and fundamental analyses of tokens before adding their contract address to the sniper tool. 

• Diversify your snipes across multiple token niches to mitigate targeted risks. For instance, mix meme coins with altcoins. 

• Set predefined parameters that match your trading patterns and risk appetite. 

• Leverage stop-loss orders to exit your position when the market forces move against you. 

• Take profits whenever you can. 

Summary

Crypto sniping bots can present potentially lucrative investment opportunities if you know how to use them safely and avoid prevalent scams and risks. Leverage this guide to understand these pitfalls and best practices to mitigate them, especially if you’re a beginner. Most importantly, use a bot that ticks all the boxes of a reputable tool without breaking the bank or compromising a premium experience.