Researchers from Hull University and the ICMA Centre have tested technical trading rules in several cryptocurrency markets and found they yield higher risk adjusted returns than a simple buy and hold strategy.
Robert Hudson from Hull University Business School and Robert Urquhart from ICMA Centre, Henley Business School tested four cryptocurrencies: Bitcoin, Litecoin, Ethereum
and Ripple using the full extent of historical data available for each currency. They then tested five types of technical trading rules in these markets: moving averages, filters, support and resistance, oscillators and channel breakouts. Variations of these rules totaled 14,919 that were tested across the four cryptocurrency markets.
Returns generally exceeded that of a simple buy and hold strategy although the technical trading rules did not generate positive returns in the out-of-sample period for Bitcoin. They found that the annualized average returns for each type of technical trading rule for each cryptocurrency market were all statistically significant at the 5% level indicating the robustness of the results. The Sharpe ratio was also high, indicating high risk-adjusted returns from implementing technical trading rules for cryptocurrencies. They also found that the higher returns were not eradicated by higher transaction costs.