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    ETH-BTC-USDC momentum beta

    ETH and BTC momentum strategy to maximize gains in bull market and avoid losses in bear market, on Polygon

    Strategy description

    This strategy is a momentum and breakout strategy.

    • The strategy trades ETH and BTC over long term time horizon, doing only few trades per a year.
    • The strategy delivers similar profits as buying and holding ETH and BTC, but with much less severe drawdowns.
    • The strategy performs well in long-term Bitcoin bull market.
    • In bear and sideways markets the strategy does not perform well.
    • It is based on RSI technical indicator, the strategy is buying when others are buying, and the strategy is selling when others are selling.

    Past performance is not indicative of future results.

    Assets and trading venues

    • The strategy trades only spot market
    • We trade two trading asset: ETH and BTC
    • The strategy keeps reserves in USDC stablecoin
    • The trading happens on QuickSwap and Uniswap on Polygon blockchain
    • The strategy decision cycle is daily rebalances

    Backtesting

    The backtesting was performed with Binance ETH-USDT and BTC-USDT data of 2019-2024.

    The backtesting trading venue (Binance) is different from the live trading venue (Quickswap, Uniswap), because DEX markets do not have long enough history to result to a meaningful backtest.

    The backtesting period saw one bull market rally that is unlikely to repeat in the same magnitude for the assets we trade.

    Past peformance is no guarantee of future results. Like with manual trading, automated trading is unlikely to be perfect. There will be variance in the range of 30% - 50% in the results.

    Profit

    The backtested results indicate 80% estimated yearly profit (CAGR).

    This is similar profit as you would get by buying and holding BTC or ETH.

    Risk

    This strategy has -30% backtested maximum drawdown. This is much less severe compared to buy and hold, making the strategy less risky than buy and hold.

    For further understanding the key aspescts of risks

    • The strategy does not use any leverage
    • The strategy trades only established, highly liquid, trading pairs which are unlikely to go zero

    Benchmark

    For the same backtesting period, here are some benchmark of performance of different assets and indices:

    CAGR Maximum drawdown Sharpe
    This strategy 84% -34% 1.78
    SP500 (20 years) 11% -33% 0.72
    Bitcoin (backtesting period) 76% -76% 1.17
    Ether (backtesting period) 85% -79% 1.18

    Sources:

    Trading frequency

    The strategy is very slow moving macro-like strategy.

    This strategy is estimated to to rebalance every 20 days and enter/exit positions even less frequently.

    Robustness

    This strategy does not have good robustness tests available.

    Updates

    This is one of the early, simple, strategies deployed on Trading Strategy protocol.

    It is likely this strategy will be replaced with a newer, more robust, more optimised, version in some point of the future. Follow Trading Strategy for updates as you need to move your balance to a new strategy.

    Further information