Ethereum's Lower Risk Profile Favors The Bulls

Jul 17, 2023

IN TODAY’S REPORT

What we cover: Ether’s >= 7% gain and 60-day closing high. Current conditions vs buy and hold. Worst trade comparison.

TODAY’S STATS

Ether’s Large Gain and 60-Day High Beats the Baseline

While most market participants’ attention remains glued on Bitcoin’s battle for $31,000, Ether recently closed at a 60-day high to retake the $2000 level, at least for a day.

Today we’ll look at similar Ether setups in the past to see how the number two crypto has performed historically, examining all data and outcomes before comparing them to a simple buy and hold strategy. Let’s take a look!

`ETHEREUM (ETH/USD). Daily Chart with 200ma.`

Our three setup conditions are simple:

QUERY SETUP CONDITIONS:

CONDITION 1: Ether closed at a 60-day high
CONDITION 2: Ether gained at least +7.0% in a single day
CONDITION 3: Ether closed above its 200-day moving average


ENTRY AND EXIT CONDITIONS:

1. ENTRY CONDITION: Enter long ("buy") at the open of the next daily candle
2. EXIT CONDITION: Exit ("sell") N-days later

`ETHEREUM (ETH/USD). Average Trade Comparison, Current Conditions vs “Buy and Hold”`

Looking at hypothetical average trade results, both the current conditions and a buy and hold approach have historically produced positive outcomes, but the current technical setup clearly has the upper hand.

Average trade results for the current setup have returned 10.7%, 21.7%, and 32.2% using 7-day, 15-day, and 30-day hold times respectively.

Compared to buy and hold’s more modest 3.1%, 7.3%, and 17.6% over the same periods, the current setup conditions are 2x to 3x greater than buy and hold - a solid edge of outperformance.

Over intermediate-term hold times from 60 days to 6 months, hypothetical average trade results using current conditions are mixed vs. the buy and hold results, though once again positive.

Using a long-term one year hold, however, current conditions slay buy and hold, delivering a whopping +1174% vs. “just” 507% for buy and hold. The bulls have the edge, without question.

`ETHEREUM (ETH/USD). Worst Trade Comparison, Current Conditions vs “Buy and Hold”`

From a risk-based perspective, when we compare the current condition’s worst trade values to buy and hold, there’s simply no arguing with the bulls. For all exits between a 7-day and 60-day hold time, Ether’s current conditions shows a worst loss value of -33.6% as opposed to -78.7% for buy and hold.

Interestingly, only a 365-day hold time appears equivalent between current conditions and buy and hold.

The upshot? Whether Ethereum produces similar average trade outcomes or not going forward, holding ETH right now appears to offer dramatically lower than average risk. While our patience may be tested in this pre-Bitcoin halving year, we’ll gladly take it.

THE TLDR

A Few Key Takeaways

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✔ Average trade results for the current setup have returned 10.7%, 21.7%, and 32.2% using 7-day, 15-day, and 30-day hold times respectively
✔ Using a long-term one year hold, however, current conditions slay buy and hold
✔ Holding ETH right now appears to offer dramatically lower than average risk

peace_love_crypto

-DB

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