Using algorithmic trading to analyze short term profitability of Bitcoin |
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Author: | Ahmad, Iftikhar1; Ahmad, Muhammad Ovais2,3; Alqarni, Mohammed A.4; |
Organizations: |
1Department of Computer Science and Information Technology, University of Engineering & Technology Peshawar, Peshawar, Pakistan 2Department of Mathematics and Computer Science, Karlstad University, Karlstad, Sweden 3M3S Research Unit, University of Oulu, Oulu, Finland
4University of Jeddah, College of Computer Science and Engineering, Department of Software Engineering, Jeddah, Saudi Arabia
5University of Jeddah, College of Computing and Information Technology at Khulais, Department of Information Technology, Jeddah, Saudi Arabia |
Format: | article |
Version: | published version |
Access: | open |
Online Access: | PDF Full Text (PDF, 0.3 MB) |
Persistent link: | http://urn.fi/urn:nbn:fi-fe2021051029335 |
Language: | English |
Published: |
PeerJ,
2021
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Publish Date: | 2021-05-10 |
Description: |
AbstractCryptocurrencies such as Bitcoin (BTC) have seen a surge in value in the recent past and appeared as a useful investment opportunity for traders. However, their short term profitability using algorithmic trading strategies remains unanswered. In this work, we focus on the short term profitability of BTC against the euro and the yen for an eight-year period using seven trading algorithms over trading periods of length 15 and 30 days. We use the classical buy and hold (BH) as a benchmark strategy. Rather surprisingly, we found that on average, the yen is more profitable than BTC and the euro; however the answer also depends on the choice of algorithm. Reservation price algorithms result in 7.5% and 10% of average returns over 15 and 30 days respectively which is the highest for all the algorithms for the three assets. For BTC, all algorithms outperform the BH strategy. We also analyze the effect of transaction fee on the profitability of algorithms for BTC and observe that for trading period of length 15 no trading strategy is profitable for BTC. For trading period of length 30, only two strategies are profitable. see all
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Series: |
PeerJ computer science |
ISSN: | 2376-5992 |
ISSN-E: | 2376-5992 |
ISSN-L: | 2376-5992 |
Volume: | 7 |
Article number: | e337 |
DOI: | 10.7717/peerj-cs.337 |
OADOI: | https://oadoi.org/10.7717/peerj-cs.337 |
Type of Publication: |
A1 Journal article – refereed |
Field of Science: |
113 Computer and information sciences |
Subjects: | |
Funding: |
The authors received no funding for this work. |
Copyright information: |
© 2021 Ahmad et al. Distributed under Creative Commons CC-BY 4.0. |
https://creativecommons.org/licenses/by/4.0/ |