The Odds Favor The King

Jul 20, 2023

IN TODAY’S REPORT

What we cover: Bitcoin’s 25-day range falls below 5.5%. Current conditions vs buy and hold. Win % comparison.

TODAY’S STATS

Bitcoin’s 25-Day Range Falls Below 5.5% As Base Continues

Bitcoin’s most recent close above the critical 31,000 level was only its second in 2023, but not enough to sustain an attack on higher levels. As we’ll see, the stats suggest that another attack — a successful one leading to much higher levels for the king crypto — will come in time.

While there are innumerable reasons to believe that, we defer instead to the weight of the evidence and probability analysis. Beliefs can blind the believer. Evidence illuminates the perceiver.

Today we look at the continuing drop in Bitcoin’s closing range, more specifically what the 25-day range falling to below 5.50% means historically. We’ll examine all data and outcomes before comparing them to a simple buy and hold strategy. Let’s dive in!

`BITCOIN (BTC/USD). Daily Chart with 25-Day Range <= 5.5% and Rangeometer.`

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As our proprietary Rangeometer indicator illustrates, Bitcoin’s daily range has fallen to an extreme low level in recent days. Our range condition is singular and today’s query is as follows:

QUERY SETUP CONDITIONS:

CONDITION 1: Bitcoin's 25-day closing range <= 5.5%


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

The average trade comparison below reflects two different approaches:

Today’s Conditions: Buy Bitcoin when its 25-day closing range is less than or equal to 5.50%, then sell “N days later”
Buy and Hold: Buy Bitcoin if it closes higher than 0.00000001, then sell “N days later”

Our goal is to see whether the narrow basing action we’re seeing now is bullish or bearish in an absolute sense, as well as how it stacks up relative to a simple “buy and hold” strategy.

`BITCOIN (BTC/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 modestly positive outcomes over the short-term (7 to 30 days). These results are very similar to last week’s analysis of Bitcoin’s basing action, with the (slight) edge going to today’s conditions over buy and hold in the short-term.

The yellow highlight indicates each period in which today’s narrow range conditions beat a buy and hold approach. Again, today’s setup beats buy and hold nearly across the board in terms of average trade. Good stuff and reasonably bullish.

For another perspective, let’s look at the Win % for each approach. Win % is short-hand for winning percentage, also known as percent profitable or win rate.

`BITCOIN (BTC/USD). Win % Comparison, Current Conditions vs “Buy and Hold”`

Here we see that Bitcoin’s current setup has an excellent Win % which historically has held above 80% nearly across the board following such bases, easily beating buy and hold’s meager profitability in the mid-fifties to slightly above. The outlook remains statistically favorable. The odds favor king.

THE TLDR

A Few Key Takeaways

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✔ Beliefs can blind the believer. Evidence illuminates the perceiver. 
✔ Again, today’s setup beats buy and hold nearly across the board in terms of average trade.
✔ Bitcoin’s current setup has an excellent Win % which historically has held above 80% nearly across the board following such bases

peace_love_crypto

-DB

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