A Decade of Evidence of Trend Following Investing in Cryptocurrencies

TL;DR

This paper provides a decade of evidence that trend following strategies in cryptocurrencies can yield significant returns, comparable to commodities, and offer diversification benefits against equities.

Contribution

It presents the first extensive empirical analysis of trend following in cryptocurrencies over a decade, demonstrating its profitability and diversification potential.

Findings

255% annualized returns from trend following

Cryptocurrencies have commodity-like risk-adjusted returns

Strong diversification benefits against equities during bear markets

Abstract

Cryptocurrency markets have many of the characteristics of 20th century commodities markets, making them an attractive candidate for trend following strategies. We present a decade of evidence from the infancy of bitcoin, showcasing the potential investor returns in cryptocurrency trend following, 255% walkforward annualised returns. We find that cryptocurrencies offer similar returns characteristics to commodities with similar risk-adjusted returns, and strong bear market diversification against traditional equities. Code available at https://github.com/Globe-Research/bittrends.