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The week's question
In December 2024, in the thread "Re: BRK: Why Not XOM?", BreckHutHigh asked the members: "What about the long road trips with kids?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: mungofitch 🐝🐝🐝 GOLD
SHREWD
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Number: of 21939 
Subject: Re: Crypto Capital
Date: 07/31/24 7:03 PM
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No. of Recommendations: 12
But I'm happy to post a well proven bitcoin timing/trading scheme if anybody is interested : )
...
Interested.


Here's a simple one.

For each trading day, calculate the highest reported bitcoin price in the prior 3 months: a sliding window.
Count how long it has been since a day that the calculation was higher than the same calculation done the day before.
The scheme is simple: If it has been less than a month since a fresh recent high (21 trading days), be long bitcoin. Otherwise, sit on cash.
That's it.

Where does it stand now? It's about 139 trading days since a fresh recent high right now, so it recommends cash. The last long position was from (close) 2024-02-12 to (close) 2024-04-04. The price rose 37% in those 7.4 weeks. In the 17 weeks since then the price you'd have been in cash and the price is still a bit lower than at the sell day.

Are the magic numbers overtuned? Not terribly, it seems.
You can do hold anywhere 2-5 weeks since the most recent fresh recent high, but a calendar month has worked well and is easy to remember.
The "recent high" calculation looks back 3 months, but you could use 4 or 5 or 6 months and still get relatively similar results.

Stats since late 2017 when I first posted about this type of timing for bitcoin:
You'd have been long only 38% of the time, CAGR of bitcoin price during those days +134%/year.
You'd have been in cash 62% of the time, CAGR of bitcoin price during those days -15.2%/year.
Bitcoin buy and hold total return since then +842% (24.3%/year)
Scheme total return ignoring interest +2297% (44.6%/year)

Since you're in cash most of the time, and the average return during those times is poor, the drawdowns are mild compared to buy and hold.
My preferred risk metric comes in at 13.1% in this stretch, which is not a smooth ride (you might see this from the Nasdaq over time), but buy-and-hold bitcoin has been risk metric 27.9% in the same stretch. On my risk metric a score of 6-7% is very smooth and almost unachievable, and at 2-3% you're starting to look like Mr Madoff.

This works in part because this type of scheme works to some degree on almost any "commodity" with jagged pricing but strong trends, and probably in part because about half of all bitcoin trading has been shown to be fake wash trades trying to create the impression of steady up-trends and fake rallies and high volume.

I see no reason to believe that the (so far) long term up trend in bitcoin prices will continue indefinitely. Without ongoing increments in the demand to hold (transaction volumes being irrelevant), the natural long term result is either flat or negative prices. But in that situation this scheme will keep you in cash most of the time, which would not be as bad as a wipe-out. For example, 2022 was terrible for bitcoin prices, down -57%. The scheme was in cash 93.4% of the year, so it was down only -12.8% before earned interest. Bad, but not life-changingly bad.

Jim
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This community has written 21,448 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 57 recs · 2023
Summary of 2Q 2026 · 54 recs · 2026
3Q Summary · 53 recs · 2024
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