Catching Crypto Trends; A Tactical Approach for Bitcoin and Altcoins

Carlo Zarattini, Alberto Pagani and Andrea Barbon
Additional contact information
Carlo Zarattini: Concretum Group
Alberto Pagani: University of Parma
Andrea Barbon: University of St. Gallen; University of St.Gallen

No 25-80, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: In recent years, cryptocurrencies have attracted significant attention from both retail traders and large institutional investors. As their involvement in digital assets grows, so does their interest in active and risk-aware investment frameworks. This paper applies a well-established trend-following methodology, successfully deployed for decades in traditional asset classes, to Bitcoin, and then extends the analysis to a comprehensive, survivorship bias-free dataset covering all cryptocurrencies traded since 2015, to evaluate whether its robustness persists in the emerging digital asset space. We propose an ensemble approach that aggregates multiple Donchian channel-based trend models, each calibrated with different lookback periods, into a single signal, as well as a volatility-based position sizing method. This model, applied to a rotational portfolio of the top 20 most liquid coins, achieved notable net-of-fees returns, with a Sharpe ratio above 1.5 and an annualized alpha of 10.8% versus Bitcoin. While assessing the impact of transaction costs, we propose a straightforward yet effective portfolio technique to mitigate these expenses. Finally, we investigate correlations between crypto-focused trend-following strategies and those applied to traditional asset classes, concluding with a discussion on how investors can execute the proposed strategy through both on-chain and off-chain implementations.

Keywords: Trading Systems; Algo Trading; Momentum; Trend-Following; Cryptocurrencies; Risk Management; Technical Analysis; Decentralized Exchanges; Blockchain; Decentralized Finance (search for similar items in EconPapers)
Pages: 38 pages
Date: 2025-10
New Economics Papers: this item is included in nep-fmk and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2580

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