Ecoinometrics - Bitcoin’s time in the market and opportunistic investing
Trading or investing? Why not do both.
How confident are you in your trading abilities?
Bitcoin is a relatively volatile asset (even though it isn’t what it used to be). And volatility rhymes with opportunity. Or as someone said: chaos is a ladder.
But the real question is can you take advantage of those opportunities.
If you are a trading genius then maybe it is really worth hoping in and out of the Bitcoin market to maximize your returns. But what if you aren’t?
Maybe there is a middle way with opportunistic timing…
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P.S. Checkout our latest tracker of MicroStrategy Bitcoin holdings at https://www.ecoinometrics.com/microstrategy-bitcoin-holdings-with-charts/.
Bitcoin’s time in the market and opportunistic investing
The takeaway
Take four scenarios:
Each year you managed to avoid the worst 10 days for BTC (in terms of daily returns). Congratulations, you are a trading genius.
Each year you missed out on the best 10 days for BTC. Tough luck.
Each year you managed to avoid the worst 10 days but that also cost you to miss the best 10 days.
You are not trading. Just buy and hold. You are maximizing your time in the market.
We back tested those four scenarios on Bitcoin over the past 10 years. For each year we report the total return. Here are the results.
The conclusion is that:
The simplest buy and hold strategy, full time in the market, performs relatively well for the effort it takes to implement.
But if you can implement at least some macro timing to avoid the worst times (or even better capitalize on them) there is a huge upside potential.
That’s actually what I advocate all the time in this newsletter:
Pick investment with potential for asymmetric returns.
Decide on a time horizon, entry points and exit points based on macro considerations.
This is simply long term investing with opportunistic timing.
Let’s dig into the details.
Good days and bad days
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