How to Trade Crypto Bubbles with a Systematic Long-Short Investment Strategy

in #bitcoin6 years ago

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Executive Summary
This research paper analyses the performance of a backtested systematic long/short crypto investment strategy applied to a basket of top 14 cryptocurrencies by traded volume. In particular, it shows the superior performance of this strategy on both risk and returns compared to a passive buy-and-hold investment in Bitcoin or a crypto basket, which in contrary experience big and long drawdowns. It also highlights that it is not advisable invest in crypto basket funds, since their performance is very similar to a passive investment in Bitcoin.

This research is structured as follows. The first section outlines the characteristics of cryptocurrencies from an investment point of view. The second and third sections analyze the performance of a passive investment in Bitcoin and crypto basket respectively. The fourth section compares the performance of a hypothetical systematic long/short crypto trading strategy compared to a passive investment in Bitcoin and in a crypto basket. The fifth section concludes with key takeaways.