E Point Perfect – Interesting and beneficial content

Here’s How Profitable On-Chain Bitcoin Trading Really Is: Strategy Backtesting


article image

Arman Shirinyan

On-chain trading strategies are real despite their low popularity and questionable usefulness

On-chain analysis is a relatively new way of predicting movements and trends on the cryptocurrency market, which is why its tools have not been so widely adopted by traders and investors compared to technical indicators.

As suggested by the backtesting of the sophisticated trading strategy based on the PnL Index derived from the PCA of MVRV, NUPL and LTH SOPR indicators, the usage of the aforementioned indicators while trading BTC would have been 142x more profitable than regular holdings.

The strategy utilizes tools that mostly determine the spending nature on the wallets of traders and investors. It also determines when the market is overbought and oversold, which can be used for forming actual entry or exit signals for those who use the strategy.

As highlighted by the analyst, the main problem is that traders are not patient enough to keep their positions open for more than six months until the cycle changes since on-chain analysis is mostly a long-term forecasting tool.


The problem with on-chain data

The main issue with using the on-chain data and implementing it into your trading style is subjectivity and lack of actual testing. Back when Bitcoin was at the ATH, on-chain indicators and people who use them predicted the continuation of the trend and breaking new records like $100,000 and even $300,000.

The cryptocurrency community has also expressed its concerns about the usefulness of the on-chain tools that remain underdeveloped and untested. Users also reminded the analyst that he himself predicted a bottom for Bitcoin since the first cryptocurrency reached $50,000, which makes the effectiveness of the tools he promotes questionable.

At press time, Bitcoin is trading at around $20,000 after briefly plunging below $18,000 yesterday. 


Source link

Related posts

BTC, DOGE and SHIB Price Analysis for July 14

Ripple Expands Further to UK and Europe as Modulr Nabs New Deal

Vitalik Buterin Believes Elon Musk’s Twitter Office Should Be Moved to Switzerland

BNY Mellon Officially Enters Cryptocurrency Custody Business

52,000 BTC Bought by Bitcoin Sharks Over Past Month: Report

Cardano’s Vasil Upgrade Goes Live on Testnet