As algorithmic trading becomes standard practice in financial markets, there is a growing interest in comprehending the impact of trading bots on market dynamics, particularly concerning liquidity and investment returns. Despite evidence indicating that trading bots expedite market transactions, there is a dearth of research exploring their influence on human traders and their specific roles in cryptocurrency markets. This study leverages an unforeseen and abrupt IT event that temporarily removed trading bots from specific assets to quantify the value of their presence. Using a unique dataset of cryptocurrency transactions, we draw on investment decision-making theory to investigate how the presence of trading bots influences investment returns for human traders in online cryptocurrency markets. Our findings reveal that, when present, trading bots assume a market-making role, capitalizing on their rapid scaling characteristic. This role enhances human traders' investment performance by introducing stability to the market context. This effect persists consistently, whether considered a main effect or mediated by context instability. Furthermore, in the absence of trading bots, their impact varies based on the financial asset type and the levels of investment performance among traders. This study helps us understand how trading bots influence financial markets and human investment decisions.
