When I am analyzing a new market to trade, I always start out with the fundamentals like, whats the average range (actually I look for average swing but thats for another article) per time period, average volume and its standard deviations or also which period of day is most volatile/active. Especially in 24hour markets like FX (or Crypto in this case) it can really help to split up the day in 3 sessions, the Asian-, European- and US session. Working in one of the top 5 wealth managers in the world, I can tell you that we certainly care which session we are in. FX books (not the ones you can read in ;-)) are handed over from our Asian guys to the Traders that are handling the Euopean session who in turn hand over their book to our guys in NY & Chicago. If we had to execute a large trade, we often waited for certain time periods (market closes/opens) when liquidity was greatest.
In this article I will not focus on liquidity but rather which time period is the best to buy Bitcoin and which is best to sell. I will use data from the 01.01.2018 until the 30th of May 2019. At the time of this writing this leaves only about one month for out-of-sample testing but the goal is not to create a full trading strategy but rather do some research. As time passes more true out-of-sample data will be available and also the period before 2018 can be used for further validation.
During the above period Bitcoin went from 13’850$ on the 01.01.2018 down to 3’215$ and since April 2019 it adavanced up to 12’215$. The buy-and-hold performance for this period was a loss of just over 1’600$.
Which time of day is best to buy Bitcoin?
I had mentioned the 3 trading sessions above. Lets see how the performance would have been if one bought every day at a certain time and held the trade for 8 hours, a 1/3 day. All times are Berlin times.
The Table above shows the performance of buying 1 Bitcoin and holding it for 8 hours. Row 14 shows the highest profit of 5313$ during a period (01.01.2018 -30.05.2019) where Bitcoin buy-and-hold lost 1600$. Entrytime “0” means buying BTC at 00:00 Berlin time.
What can be seen is that the Asian session is clearly the worst performer while the later European and Early US sessions are better.
Lets break it down even more and look at hourly performance (buying and exiting the trade after 1 hour):
Again the worst performer seems to be the hourly periods during the Asian session. Best are European Lunch times and US evenings.
Which day of week is best to buy Bitcoin?
Lets quickly look what day of week is best to buy Bitcoin.
0=sunday, 1= monday, …
What is very obvious is that friday and saturday were the only weekdays were it was profitable to buy bitcoin (entry was on 00:00 berlin time, exit 24hours later).
So what now with all this info? There are multiple ways of using this. Seasonality like this study actually works well in other markets like commodity futures and equities. I have successfully used this as filter for some equity index futures models. In equities, what works quite well is to only go long towrwards the last few days of the month or the first few days i.e. from the 28th to the 2nd. A reason could be that many IRA accounts are buying at the end of month which creates demand. What also works well is trading before important news events like the FOMC or Futures/Options expiration days. In crypto, it seems that buying only on a friday or saturday could be a filter if one wants to reduce the exposure in the market.