Bitcoin fluctuates frequently, does it hold money (HODL) or trade?

Recently, bitcoin has fluctuated frequently. I believe many investors have doubts about the choice of holding money (Hodl) or short-term trading.

Unlike the fully mature trading markets such as the stock market, the cyclical performance of the digital currency market represented by bitcoin is more pronounced.

Take the above round of rising cycle as an example:

In the 782 days from October 28, 2015 to December 17, 2017, Bitcoin rose from a minimum of 287.83 US dollars to a maximum of 19166.97 US dollars, an increase of 6659%, and the average daily increase was close to 0.53%. However, the process is not imagined. It has risen all the way, but it has shown a pattern of constant fluctuations, as shown in the following figure:

(Picture 1, October 28, 2015 – December 17, 2017, the percentage of daily fluctuations during the bull market, the data is calculated by the daily BTC Opening price and Closing Price)

By observing the above figure, we can roughly see that at least 1/3 of the 782 days of the last rising cycle are negatively fluctuating. In fact, the exact figure is 319 days, which is 40.79%, that is, It is said that in the last bull market every two days, there are two days of falling, then, does this mean that there is a chance for short-term operation?

In order to facilitate the calculation, we only consider the case where the daily decline is close to or exceeds 5% (small drop), then only about 49 days of the 782 days are met, and the number of days in which the daily decline exceeds 10% (the plunge) is 11 day.

That is to say, the proportion of days that can achieve higher profitability in the short-term is about 49/782=6.26%, and the number of days that can make a large profit is about 11/782=1.4%.


(Picture 2, from:

We assume that there are investors A and B and C who also invested $10,000 in bitcoin (about 35 BTC) on October 28, 2015:

Investor A's strategy is to hold the currency (HODL), then by December 17, 2017, its value of bitcoin is about 665,900 US dollars .

Investor B's strategy is that half (17.5 BTC) does not move the currency, and the other half conducts separate trading transactions every day. Then calculating its expected income becomes very troublesome. For simple calculation, we will have a daily fluctuation of significantly less than 5%. The day of the calculation is offset (as a no-loss or no win), and only the transaction fee for each transaction is calculated.

Then we only need to calculate the remaining 49-day down market and the expected result of the 85-day rally. And we assume that investor B can perfectly achieve the operation in the case of correct direction (that is, sell at a high point and pick it up from a low point, but it is difficult to do in reality), and its direction is judged. The correct rate is 60%, then by December 17, 2017, the probability of an investor selling a fly (meaning the price of the coin after the sale) is about 25.37% (85/134*40%), the day when the coin can be earned. The probability is about 21.94% (calculated as 49/134*60%), and the average daily fluctuation of this 85-day rise is about 7.81%, and the average daily fluctuation of 49 days is about 8.14%, so obviously, without considering the handling fee. In this case, Investor B should end up losing money. In theory, unless it can achieve a correct rate of more than 70% (fuzzy calculation), if investor B trades in the previous round of bull market, there will be a loss. The situation of the currency.

However, the exchange is obviously not charitable. The trader needs to pay a two-thousandth of the fee for each transaction, and that the transaction needs to be traded 1564 times in 782 days, then the operation will not lose or win. The percentage of remaining assets is (99.8%)^1564 = 4.366%.

Then, on December 17, 2017, the final currency held by Investor B is equal to 18 BTC, worth about $340,000 .

Investor C's strategy is to use all the short-term, assuming that its judgment level is similar to that of investor B, and also conduct a separate trading transaction every day, then by December 17, 2017, the final investor C holds the currency. It is about 1 BTC, worth about $19,000 (the actual situation may be even lower, even in the case of unguaranteed).

And if the trader adds a bar during the transaction, there is a risk of zeroing .

Does that mean that there is no hope in the short-term? This is not the case. It only requires the trader to have a correct rate of more than 70% and reduce the trading frequency. It only chooses to sell before the big drop, and buy back after the big fall. Then, it has the hope to earn coins, and this day For example, as mentioned above, it is about 6.26%.

(Ps: The so-called high-frequency trading is actually a price difference between exchanges, and it is more certain, not as big as a trader, so it cannot be compared)

It can be seen that in the bull market cycle, for most investors, HODL is far more suitable than frequent trading, and professional investors want to outperform, the correct rate of judgment needs to exceed the threshold of 70%, and as little as possible. Trading.

So what is the situation in the bear market?

As shown below:

(Picture 3: Data from December 18, 2017 to December 10, 2018)

Simply give the conclusion:

Contrary to the bull market, the bear market chooses HODL is very miserable, investors will basically shrink 80-90% of assets, in contrast, the choice of high clearance and exit will be the best, and the selection of lower frequency transactions, will Better than HODL, high-frequency trading is worse than HODL, and the worst is to use leverage and futures, of course, except for traders with high accuracy.


Through the above analysis, we can draw the conclusion that for the majority of participants, the bull market does not move the best, the bear market clearance is the best, the more transactions, the greater the probability of loss, and the leverage The higher the multiple, the faster the return to zero.

And what cycle is the current market, and which way investors should choose, it is the benevolent seeing benevolence, the wise see wisdom.

(Note: The above calculations are for reference only. The competition currency period is different from Bitcoin and needs to be considered separately.)