How does cryptocurrency sniping work?

Traders vs bots: what is cryptocurrency sniping?

What is cryptocurrency sniping?

Cryptocurrency or token sniping is a trading strategy that involves the instant purchase of digital assets within seconds of the start of trading on a decentralized (DEX) exchange.

The term "sniping" is borrowed from military terminology, where a "sniper" is someone who hits a target quickly and accurately at long range. In the context of cryptocurrency, token sniping means that traders or bots "shoot" for the desired price at the moment trading starts, capturing assets before the price changes significantly.

The emergence of the token sniping strategy was logical, as cryptocurrency listings are always accompanied by high volatility — a rapid change in the value of a cryptocurrency over a short period. Within seconds of the start of trading, a token's price can soar by thousands of percent, so it's not surprising that many traders seek to seize such a profitable opportunity.

Given the rapid price changes in cryptocurrency, traders may simply not have enough time to buy or sell assets at the price they need during manual trading. This is why traders use specialized bots for cryptocurrency sniping, which automate the buying and selling of tokens on a DEX.

Sniping bots can automatically check smart contracts and track the listing moment to execute the purchase/sale of cryptocurrency at the right time.

How does token sniping work?

With the advent of the first DEXs, such as Uniswap, Balancer, and Sushi, the practice of initially providing liquidity in the DeFi market has become increasingly popular. Therefore, before understanding how cryptocurrency sniping works, it is necessary to understand the structure of decentralized exchanges.

The liquidity creation process usually involves adding a pair of assets (such as Ethereum and a new token) to a specially created pool. These funds are then used for transactions between other traders, and liquidity providers earn rewards in the form of commissions for each trade conducted in their pool.

Most decentralized exchanges operate under the Automated Market Maker (AMM)* model, which allows token creators to add initial liquidity to their assets and launch trading without platform approval.

* Automated Market Maker (AMM) is a pricing model used on decentralized exchanges where the prices of tokens are automatically determined using algorithms rather than through traditional buy and sell orders. AMM allows transactions without the need for centralized intermediaries, and pricing is determined by supply and demand within a specific pool.

For example, well-known meme tokens like Shiba Inu (SHIB) and Pepe (PEPE) were listed on the Uniswap decentralized exchange before they became popular and were listed on major centralized exchanges like Binance, Coinbase, and ByBit.

Cryptocurrency sniping process

1. Choosing and setting up a sniping bot

Before starting token sniping, you need to find an appropriate bot. While ready-made solutions exist, you can also commission a bot for cryptocurrency sniping from developers. However, the cost of creating a token sniping bot can reach tens of thousands of dollars.

There are instances where users have developed token sniping bots with the help of neural networks. For example, the famous trader Blum_OG created a cryptocurrency sniping bot for meme coin trading using ChatGPT.

The most critical step at the first stage is bot setup. If not done correctly, the trader risks making an error that could lead to losses when sniping tokens. Here's what needs to be addressed first:

Buying at the Minimum Price: Ensure the bot does not execute a trade at an inflated price to avoid potential losses.
Ability to Adjust Fees: The most critical factor in cryptocurrency sniping is the speed of transactions, so the bot must allow you to increase the gas* fee to prioritize the transaction.
Ability to set stop-loss* and take-profit* levels: These features help control potential losses in advance.

* Gas refers to the fee charged for processing transactions or executing smart contracts in the blockchain. The network determines the gas price and can vary depending on the current network load. Users can increase the gas price to speed up transaction processing.

* Stop-loss — an order that automatically sells an asset when its price reaches a certain level, limiting losses in case of a price dop.

* Take-profit — an order for automatic asset sale when its price reaches a pre-set profit level, allowing the trader to lock in gains before the price falls.

Keep in mind that for the bot to function, the trader provides the private key for their wallet. Therefore, it's essential to ensure that the token sniping bot is not fraudulent. You should verify that other members of the crypto community are using the bot and have no complaints about its functionality, including sudden loss of funds. Additionally, some cryptocurrency sniping bots allow trading without providing a private key via an API, which helps avoid asset theft.

Important: Before starting cryptocurrency sniping, test the bot on new pools with a small amount of money to verify its effectiveness and reduce the risk of losing larger sums in the future.

2. Choosing a blockchain and platform for cryptocurrency sniping

Typically, a token is initially launched on one blockchain, with support for other networks introduced gradually. Most new tokens appear on networks such as Ethereum, Solana, Base, BNB Chain, and TRON. However, competition for cryptocurrency sniping on these blockchains will also be higher.

Choosing the right blockchain and platform is crucial, as there are not only universal token-sniping bots but also bots tailored to specific ecosystems.

3. Choosing a coin for token sniping

The primary goal of a "sniper" is to find a token that hasn't yet been launched on an exchange. To track such assets, experienced traders use social networks such as X, Discord, Reddit, and Telegram.

Special tools are also used to find new tokens for cryptocurrency sniping, some of the popular ones being:

Dextools
Unidex
Poocoin

Experienced users can use more advanced tools to find new tokens, such as the Etherscan explorer and similar platforms.

Once the user finds a suitable token for sniping, they should carefully study the project, as the crypto industry is rife with fraudulent cryptocurrencies. The process for evaluating projects was discussed in the article on cryptocurrency security.

4. Preparing a wallet for token sniping

Before starting cryptocurrency sniping, you must create a wallet with a new or imported private key and fund it. You should deposit enough to cover the transaction and network fees (at least for one buy and one sell), so you'll need to overfund the wallet slightly. When calculating network fees, be mindful of network congestion, which can rise at any moment.

Keep in mind that new tokens usually need to be manually imported into the wallet, but this is not necessary for trading with a bot.

5. Launching the token sniping bot

The final stage is the actual purchase and sale of new cryptocurrency for profit. The first sniping transactions should be conducted with small amounts to avoid unexpected losses.

Losses can occur not only due to incorrect bot setup but also due to errors in its functionality or failures on the trading platforms themselves.

What are some cryptocurrency sniping bots?

MevX — a universal token sniping bot supporting different networks, including Ethereum, Solana, and BNB Chain.
Maestro Sniper Bot — another "multi-network" bot for cryptocurrency sniping, which also supports the TRON network.
Trojan Bot — a popular bot for cryptocurrency sniping on the Solana blockchain.
Unibot — a high-speed bot specifically designed for token sniping on the Uniswap platform.
Photon — a sniping bot for trading on the Solana blockchain, supporting integration with popular crypto wallets and flexible trigger settings.