Bitcoin trend history
August 15, 2023
We started our backtest not at the inception of the historical date on BTC but a little bit later on, cause any backtest started at the beginning of a massive multi-thousand percent rise would've produced a great result. Our starting date is Monday the 17th of July 2017, right before the runup of 2018. Since then if you would put 1000$ into BTC utilizing the buy and hold strategy and held it till Wed 9th of November 2023, the date which we believe constitutes the end of the previous major cycle, you would've increased your holdings by 610.98%. Which is still a very impressive gain over 5 and a half years. At the same time, you would've experienced 3 massive drawdowns of -83.9%, -62.5%, and -76.7%.
Starting on the same date, but utilizing our trend signal, selling on the red bars, and reinvesting when the signal turns positive, would have brought you a 5420% of cumulative returns, that's a 4684% excess return over the buy and hold strategy (annualized 834%). Assuming rebalancing, the total return would have amounted to 1087% (to maximize the potential profit the strategy should be implemented without rebalancing). But it's not even the best part yet. This strategy has successfully avoided all the 3 big drawdowns. Over 5 and a half years, it produces only 2 false signals. The first led to a loss of -21.39% (Sat 26 Oct 19) and the second -7.71%(Tue 25 Oct 22). So the maximum drawdown was -21.39%, which is an incredible improvement over buy and hold.
In conclusion, over time, Bitcoin will become less volatile, subsequent cycles will become less pronounced, and we would expect returns to decrease. But nevertheless, an actively managed trend-following strategy for BTC is a great addition to a portfolio. And with the reduced downside volatility which we've been able to achieve, you can be a little bit more comfortable allocating more capital than you otherwise would. We will publish updates on our trend signal below this post, acting on the signal is as simple as dedicating your desired amount of capital to buy and sell based on positive or negative signals. We do not rebalance back to our dedicated size, we reinvest whatever we make or lose.
Starting on the same date, but utilizing our trend signal, selling on the red bars, and reinvesting when the signal turns positive, would have brought you a 5420% of cumulative returns, that's a 4684% excess return over the buy and hold strategy (annualized 834%). Assuming rebalancing, the total return would have amounted to 1087% (to maximize the potential profit the strategy should be implemented without rebalancing). But it's not even the best part yet. This strategy has successfully avoided all the 3 big drawdowns. Over 5 and a half years, it produces only 2 false signals. The first led to a loss of -21.39% (Sat 26 Oct 19) and the second -7.71%(Tue 25 Oct 22). So the maximum drawdown was -21.39%, which is an incredible improvement over buy and hold.
In conclusion, over time, Bitcoin will become less volatile, subsequent cycles will become less pronounced, and we would expect returns to decrease. But nevertheless, an actively managed trend-following strategy for BTC is a great addition to a portfolio. And with the reduced downside volatility which we've been able to achieve, you can be a little bit more comfortable allocating more capital than you otherwise would. We will publish updates on our trend signal below this post, acting on the signal is as simple as dedicating your desired amount of capital to buy and sell based on positive or negative signals. We do not rebalance back to our dedicated size, we reinvest whatever we make or lose.