Crypto Momentum (BTC/ETH)
Apply simple momentum (e.g. 20d/55d MA cross or 12m trend) to BTC and ETH with strict vol cap and size limits.
Thesis (edge)
Crypto exhibits strong momentum. A simple trend rule with strict vol control may capture part of the move while limiting tail risk. For educational / research only; not advice.
Where it works (regimes)
Works in sustained bull or bear trends. Fails in chop and in flash crashes. Regime detection is hard; assume high vol and correlation with risk-on/off.
Signals
- 20/55 MA cross: long when price > both MAs. Or 12m momentum (long when > 0). Vol-scale position; cap leverage.
Portfolio construction
Equal weight BTC/ETH or single asset. Vol target 10–20% max. No leverage beyond 1x spot equivalent.
Risk model
Tail: exchange failure, regulatory shock, 50%+ drawdowns. Use small allocation and strict risk limits.
Costs & implementation
High spread and funding in derivatives; spot has custody cost. Use reputable venues only.
Failure modes
Overfitting; ignoring liquidity and execution risk; regulatory change. Past performance not indicative.
Our Notes & Suggestions
Treat as high-risk satellite. Only allocate what you can afford to lose. Prefer spot or regulated products. Document assumptions and update as market structure changes.
Our Notes & Suggestions
See the "Our Notes" subsection in the body above for practical guidance, gotchas, and best practices. Always validate regime assumptions and transaction cost assumptions before scaling.
Implementation Checklist
- Source reliable daily data (exchange or index)
- Implement MA cross or 12m momentum
- Strict vol cap (e.g. 20% target max)
- Define custody and execution process