Long-term investments to bitcoin compared to technical analysis strategies

Abstract

The purpose of this research is to investigate is it possible to receive extra profit in crypto market by using technical analysis methods. The oldest and the most famous cryptocurrency bitcoin has been selected as a subject. A test was executed during two-year period from 1.10.2016 to 1.10.2018.
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\n The research describes a nature of bitcoin and explains why it raises interest as an investment. Then from technical analysis methods are selected widely used indicators and developed three strategy based on them. First strategy is based on the moving average crossover, second one is based on the crossover of the RSI and the Bollinger Bands and third one is based on stochastic oscillator. Every strategy is tested with a trend filter and without it. A benchmark in the test is traditional buy & hold strategy.
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\n According to empirical test, every strategy can show greater return compared to buy & hold strategy. It was also observed that if both “Only Long” and “Only Short” versions are profitable, combined “Long & Short” version shows much higher profit, than the simple sum of the results of “Only Long” and “Only Short” versions. Strategy 1 provided the best performance and Strategy 3 the worst both in terms of profit and in terms of risk. The results of adding the trend filter were ambivalent in terms of profit, but totally worthwhile in terms of risk.