This Bitcoin trading strategy gained 7,830% in 5 years

Bloomberg Market Specialist Oliver Woolf and Stefan Poechhacker contributed to this article. The original version appeared first on the Bloomberg Terminal.

Background

Bitcoin is the world’s best-known cryptocurrency and has overcome concerns and volatility to provide valuable returns for many investors.

In 2021, it has already surpassed $50,000, and was up 70% for the year as of Feb. 17. The cryptocurrency’s speculative nature is regularly predicted to burn investors, but there are few signs of its price swings reversing fortunes.

The cryptocurrency is gaining momentum among financial service firms, with BNY Mellon and Morgan Stanley creating new units to look into Bitcoin. That news came on the heels of Tesla announcing a $1.5 billion investment in Bitcoin.

Savvy investors have been able to use the speculative nature of this bull market to generate significant returns. That’s even as major financial industry voices, including European Central Bank governing council member Gabriel Makhlouf, still compare the cryptocurrency to the tulip mania of the Dutch Golden Age.

The issue

An investor who bought Bitcoin five years ago would now be able to see a gain of roughly 2,600%, but this isn’t the greatest possible return on that investment. By trading Bitcoin on an optimized moving-average strategy, that same investor could be up closer to 8,000% on their investment.

Recent market moves may signal more substantial interest in the future of Bitcoin, where investors are primed to look for greater value and potential returns. “Whether it’s Musk, Mastercard or Morgan Stanley, the mood, music and momentum is impossible to ignore,” Antoni Trenchev, managing partner and co-founder of Nexo in London, recently told Bloomberg News. “To the annoyance of many, the Bitcoin express has left the station.”

The Terminal can backtest 120 different trading strategies for Bitcoin. The 50-day and 55-day pair has generated the largest returns over the past five years. The pair would have generated a profit of about 7,830%. (A standard 50-day, 200-day Golden Cross/Death Cross strategy has returned 937% over this period.)

Tracking

Bloomberg backtesting and optimization tools help investors track when trading signals have been triggered, including 30 for Bitcoin over the past five years.

Type "backtest" in the command line and select BT - Backtesting & Optimization from autocomplete. The shortcut is BT.

The backtest feature will allow you to create a table of results for your backtest optimization.

A Bitcoin Trading Strategy Based on the 50- and 55-day Moving Averages Returned Almost 8,000% Over Five Years.

The 3D Surface feature offers another visualization of the 50- and 55-day moving average combination being the top performer.

The 3D surface offers an additional representation of the results of the backtesting

For more information on this or other functionality on the Bloomberg Professional Service, click here to request a demo with a Bloomberg sales representative. Existing clients can press <HELP HELP> on their Bloomberg keyboard.

This article was originally published on 29 October 2019.

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