Technical Analysis and Cryptocurrencies

Annals of Operations Research, Forthcoming

33 Pages Posted: 3 Jun 2019 Last revised: 9 Sep 2019

See all articles by Robert Hudson

Robert Hudson

Hull University Business School (HUBS)

Andrew Urquhart

ICMA Centre, Henley Business School

Date Written: May 14, 2019

Abstract

This paper carries out a comprehensive examination of technical trading rules in cryptocurrency markets, using data from two Bitcoin markets and three other popular cryptocurrencies. We employ almost 15,000 technical trading rules from the main five classes of technical trading rules and find significant predictability and profitability for each class of technical trading rule in each cryptocurrency. We find that the breakeven transaction costs are substantially higher than those typically found in cryptocurrency markets. To safeguard against data-snooping, we implement a number of multiple hypothesis procedures which confirms our findings that technical trading rules do offer significant predictive power and profitability to investors. We also show that the technical trading rules offer substantially higher risk-adjusted returns than the simple buy-and-hold strategy, showing protection against lengthy and severe drawdowns associated with cryptocurrency markets. However there is no predictability for Bitcoin in the out-of-sample period, although predictability remains in other cryptocurrency markets.

Keywords: Technical Analysis, Cryptocurrencies, Bitcoin, Data-Snooping, Market Efficiency

Suggested Citation

Hudson, Robert and Urquhart, Andrew, Technical Analysis and Cryptocurrencies (May 14, 2019). Annals of Operations Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3387950 or http://dx.doi.org/10.2139/ssrn.3387950

Robert Hudson

Hull University Business School (HUBS) ( email )

Hull, HU6 7RX
United Kingdom

Andrew Urquhart (Contact Author)

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

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