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Timing Bitcoin with SMAs

Posted in Currency Trading

Are simple moving averages (SMA) useful for timing difficult-to-value Bitcoin? In their January 2018 paper entitled "Bitcoin: Predictability and Profitability Via Technical Analysis", Andrew Detzel, Hong Liu, Jack Strauss, Guofu Zhou and Yingzi Zhu investigate the use of 5-day, 10-day, 20-day, 50-day or 100-day SMAs to predict Bitcoin returns. Specifically, they test a trading strategy that holds Bitcoins (cash) when current Bitcoin price is above (below) a selected SMA. They assume cash earns the U.S. Treasury bill (T-bill) yield. Using daily Bitcoin prices and T-bill yield, along with data for other variables/assets for comparison, during July 18, 2010 through December 12, 2017, they find that:

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