Sunday, April 22, 2018

Crypto: First attempt at a simple trading strategy


I am starting to analyze crypto-currency data again to outline future investing options. In my first effort, I tried to convince myself that focusing only on bitcoin (BTC) was better than looking at some of the alternate coins. As documented in my previous posts, I failed and demonstrated that there are some coins with better growth patterns over the last year.

I’ve decided to re-visit some of my prior analysis and update the data considering the crazy growth and decline patters in the latter part of 2017 and the first part of 2018. In July 2017, I looked at two simple strategies for trading coins. The coins involved were BTC, ETH (Ethereum) and LTC Litecoin). I downloaded their daily price data from Jan 1st, 2017 through July 29th, 2017.

The 1st scenario was buy and hold. Starting with $1,000 on day 1, I used one-third to purchase as many of each coin as possible. This resulted in 0.33 BTC, 40.95 ETH, and 75.41 LTC. These were held until the end of the period and their daily value grew to $12,047 at the end of the period.

The 2nd scenario was a simple trading strategy. At the close of each day, the change in value of each coin was computed. A portion of the best performing coin was sold and the proceeds used to buy the worst performing coin. Kind of a dollar cost averaging scheme. The amount of coin depended on the amount the best performing coin changed. At the end of the period, the value grew to $8,988. This wasn’t as good a strategy as buy and hold (thank you Warren Buffet).

Following is a chart of their daily value.



The next step is to repeat the analysis using data through the end of the 1st quarter of 2018. That will be my next post. Follow me on Twitter, @ole44bill, to be notified when I post it.

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