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Technical trading and cryptocurrencies

Hudson, R. and Urquhart, A. (2019) Technical trading and cryptocurrencies. Annals of Operations Research. ISSN 0254-5330

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To link to this item DOI: 10.1007/s10479-019-03357-1

Abstract/Summary

This paper carries out a comprehensive examination of technical trading rules in cryptocurrency markets, using data from two Bitcoin markets and three other popular cryptocurrencies. We employ almost 15,000 technical trading rules from the main five classes of technical trading rules and find significant predictability and profitability for each class of technical trading rule in each cryptocurrency. We find that the breakeven transaction costs are substantially higher than those typically found in cryptocurrency markets. To safeguard against data-snooping, we implement a number of multiple hypothesis procedures which confirms our findings that technical trading rules do offer significant predictive power and profitability to investors. We also show that the technical trading rules offer substantially higher risk-adjusted returns than the simple buy-and-hold strategy, showing protection against lengthy and severe drawdowns associated with cryptocurrency markets. However there is no predictability for Bitcoin in the out-of-sample period, although predictability remains in other cryptocurrency markets.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
ID Code:85715
Publisher:Springer

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