My strategy to earn Bitcoin (1st Month)
TL; DR – My investing journey to earn more Bitcoin with the BTC Growth Bot which is based on the highly correlated pattern between BTC and ETH.
Quick Summary
- Goal: Earn more Bitcoin.
- Strategy: Profit from the highly correlated pattern between BTC and ETH.
- Trading Tool: Grid trading bot.
- Invest Period: Around 2 years.
For the records, I’m still holding some Bitcoin, which I won’t touch until the next bull market.
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What is Correlation?
Correlation is a statistical term describing the degree to which two variables move in coordination with one another. For example, if two coins are highly correlated, it means that they always follow the same direction.
The take here is that we want to trade our Bitcoin with the most correlated coins. Cause typically means they always follow the same direction but have a slight time difference when they go up or down.
If Bitcoin goes up first, you want to sell your Bitcoin to another coin after Bitcoin ride the rally. The other coin might probably follow the move cause they’re “highly correlated.”
Below is the correlation matrix of the top coins. It shows that BTC has the highest correlation with ETH (on a 1-year scale). You can find out more about the correlation matrix here.
And according to the matrix, we noticed that BTC and ETH are the most correlated crypto.
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For BTC and ETH, Most of the time, they moved in the same direction. Sometimes ETH rise first and sometimes BTC. Like the image below:
Here’s how you can earn more Bitcoin:
- Invest 1 BTC at ①
- Sell BTC to ETH at ②, so you’ll get $22000/$1600 = 13.75 ETH
- Buyback BTC at ③, which is 13.75 * $1900/22000= 1.1875 BTC
- From ① to ③, that’s an 18.75% gain in BTC.
We can do the above technique again and again “AS LONG AS THEY STAY CORRELATED” The hard part is that when we manually do that, we can’t help but try to time the top and bottom to swap our Bitcoin and Ether to each other.
Why use a Grid Trading Bot?
We can do this automatically by performing a grid trading bot to eliminate the emotion. The bot was designed to buy low and sell high 24/7 from the market volatility.
Few things that the bot will do for us:
- It arbitrages from that correlation during the up and down and accumulates profit in Bitcoin.
- It simply sells our BTC to ETH when Bitcoin rises first and sells ETH back to BTC when ETH follows the trend.
- While everything stays with BTC and ETH. So you won’t miss the train if the market suddenly turns bullish.
- Risks? If they stop correlating with each other, then you might have some loss in Bitcoin. But overall, you’re holding either BTC or ETH.
Don’t time the entry, DCA Bitcoin into the strategy
So I have done a quick backtest. What if I DCA my Bitcoin into the strategy, let’s say 1 BTC per month? Here are the results:
- A. DCA into the strategy with 1 BTC every month for the last 24 months.
- B. DCA into the strategy with 1 BTC every month for the last 6 months.
| total investment | final value | ROI (in BTC) | |
|---|---|---|---|
| A (long term) | 24 BTC | 30.73 BTC | 28.04% |
| B (short term) | 6 BTC | 7.5 BTC | 25% |
Although the past results do not mean it’ll be the same in the future, I still feel like this strategy is worth running, so I’m going to record and share my whole journey with you all.
Performance so far
Cause the ETH/BTC price dropped from 0.085 to 0.07 after the merge, it’s a good time to start the strategy for me.
| Date | Investment | BTC Price | ROI |
|---|---|---|---|
| 9/21/2022 | 0.75 BTC | $18,826 | 0.32% |
I’m running this strategy on Pionex; here’s the step-by-step guide cause some of you asked me for that in the last post.
- Step-by-step guidance: https://www.pionex.us/blog/how-to-start-pionex-long-term-bitcoin-earning-strategy/
Here’s the proof that I just started the strategy today 👇
I’ll add some more funds and share the latest performance every month, wish me luck!
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Trading in the crypto market carries a substantial risk and the possibility of making both significant profits and losses. Please trade cautiously, Pionex.US could not assure any profit. Risk Disclaimer