Predicting Bitcoin Returns

Welcome to our Data Report on predictors of Bitcoin returns.

Aug 10, 2021

Welcome to our Data Report on predictors of Bitcoin returns.

Key Takeaways

  • We studied whether Bitcoin’s returns can be predicted by price data and technical indicators over the period 11/5/2010 – 10/31/20 with regression analysis.
  • Momentum is found in both Bitcoin daily return and weekly return, i.e., an increase in the current return possibly leads to a higher future return. The momentum effects are fairly strong and statistically significant.
  • Major technical indicators show mixed performance in predicting 1-week and 2-week ahead cumulative returns:
    • Bearish SMA or EMA signals are somewhat effective at predicting future price performance, while bullish signals seen in moving averages are ineffective.
    • Surprisingly, an overbought signal in RSI tends to be accompanied by very strong future returns, contrary to the purpose of the RSI to detect reversal patterns.

Read the full PDF version of the report here.

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