Bitcoin rate prediction in practice, January 2021

For quite some time now, we have been presenting the results of the trend prediction of the average Bitcoin exchange rate on our Facebook group. The prediction model presented predicts the trend direction for the next 24 hours, and we publish the data as of 15:00 UTC.

What are our Bitcoin price predictions?

These are the kinds of questions we encounter when dealing with Internet users who follow our predictions. Surely, our predictions cannot be the only signpost based on which decisions are made: buy, hold, sell. What is certain is that predictions fill a gap in the market of tools dedicated to players. The gap, which until now was the lack of concrete information about the impact of emotions on the value of a financial instrument (behavioral analysis) being in constant trading (and this is Bitcoin).

Here we would like to present our strategy of using the results of the prediction of the average Bitcoin price in the 24-hour interval.

How to use Bitcoin rate prediction

How can the information from the 24-hour average Bitcoin price trend prediction be used practically? This is the question we asked ourselves at the beginning of our work on the Sentistocks tool, and this is the question Internet users are asking us.

Here we will present, using two variants as examples, the simplest approach to using the information from the 24-hour prediction in investment decisions. We developed the examples using: actual stock market exchange rate data, our emotive analysis data, and our exchange rate predictions recorded in January 2021.

Option I

The option is based on a 24-hour prediction of the average BTC price – we made the following assumptions:

  • investment in Bitcoin is $1.000,00,
  • 100% of the principal / portfolio is invested,
  • the investment is made on the spot market (only buy-sell operations are executed),
  • each operation is charged with 0.33% commission.

The signal for a buy BTC transaction (or hold if you already have BTC in your portfolio) is a situation where the forecasted average price of BTC for the next 24 hours is higher than the actual close BTC price at 15:00 UTC on the day when the prediction was set. The transaction is executed at the close price at 15:00 UTC on the day the prediction of the average price of BTC for the next 24 hours was set.

The signal for a sell BTC transaction is when the forecasted average BTC price for the next 24 hours is lower than the actual close BTC price at 15:00 UTC on the day the prediction was set. The transaction is executed at the close price at 15:00 UTC on the day the prediction of the average price of BTC for the next 24 hours is made.

The return on investment when using 24-hour average BTC price prediction data was 66%. In comparison, the return on investment when using the HODL strategy was 13%.

Option II

The option is based on a 24-hour prediction of the average BTC rate, but additionally using information from a 1-hour prediction of the average BTC rate – we made the following assumptions:

  • investment in Bitcoin is $1.000,00,
    100% of the principal / portfolio is invested,
    the investment is made on the spot market (only buy-sell operations are executed),
    each operation is charged with 0.33% commission.

The signal for a buy BTC trade (or hold if you already have BTC in your portfolio) is when the predicted average BTC price for the next 24 hours is higher than the actual close BTC price as of 15:00 UTC on the day the prediction was set.

  • If the forecasted average price of BTC for the next 24 hours is higher than the actual close price of BTC at 15:00 UTC on the day the prediction was made, the buy transaction is made at the close price at 15:00 UTC on the day the prediction of the average price of BTC for the next 24 hours was made.
  • If, in addition, the average price of BTC for the next 1 hour is lower than the actual close price at 15:00 UTC on the day the prediction was made, the buy transaction is executed at a price lower than the close price at 15:00 UTC or at the close price at 16:00 UTC (if there is no such lower price within 1 hour – from 15:00 UTC to 16:00 UTC).

Formula:

IF Ka > Kb AND Kc < Kb THEN buy at price < Kb OR buy at price Kd

Legend:

Ka = predicted average price of BTC for the next 24 hours (prediction as of 15:00 UTC),
Kb = BTC close rate as of 15:00 UTC,
Kc = predicted average price of BTC for the next 1 H (prediction as of 15:00 UTC),
Kd = BTC close rate at 16:00 UTC.

The signal for a sell BTC trade is when the predicted average BTC price for the next 24 hours is lower than the actual close BTC price at 15:00 UTC on the day the prediction is set.

  • If the forecasted average price of BTC for the next 24-hours is lower than the actual close price at 15:00 UTC on the day the prediction was made, the sell transaction is executed at the close price at 15:00 UTC on the day the prediction of the average price of BTC for the next 24 hours was made.
  • If, in addition, the average price of BTC for the next 1-hour is higher than the actual close price at 15:00 UTC on the day the prediction was made, the sell transaction is executed at a price higher than the close price at 15:00 UTC or at the close price at 16:00 UTC (if no such higher price has occurred within 1 hour, i.e. from 15:00 UTC to 16:00 UTC).

Legend:

Jeżeli Ka < Kb oraz Kc > Kb to sell po kursie > Kb lub po kursie Kd

IF Ka < Kb AND Kc > Kb THEN sell at rate < Kb OR sell at rate Kd

Legend:

Ka = predicted average price of BTC for the next 24 hours (prediction as of 15:00 UTC),
Kb = BTC close rate as of 15:00 UTC,
Kc = predicted average price of BTC for the next 1 H (prediction as of 15:00 UTC),
Kd = BTC close rate at 16:00 UTC.

The return on investment when using 24-hour BTC average price prediction data combined with using 1-hour BTC average price prediction data was 75%. In comparison, the return on investment when using the HODL strategy was 13%.

In addition, we present a table of possible decisions that led to the results presented earlier.

 

Prediction DateExpected change (prediction/close)What we can doRealisation price in $ (in option I) Realisation price in $ (in option I)
2021-01-01 15:00 buy  
2021-01-02 15:000,5%hold/buy31 344,7331 344,73
2021-01-03 15:000,2%hold/buy33 924,6833 924,68
2021-01-04 15:00-0,1%sell32 144,4333 950,00
2021-01-05 15:00-2,4%sell32 375,6232 375,62
2021-01-06 15:00-0,7%sell38 504,4638 504,46
2021-01-08 15:000,0%hold/buy41 522,5638 142,00
2021-01-09 15:00-0,51%sell40 874,4540 874,45
2021-01-10 15:00-0,59%sell39 471,4239 471,42
2021-01-11 15:00-0,20%sell33 288,4733 288,47
2021-01-12 15:000,58%hold/buy33 398,9931 332,00
2021-01-13 15:001,00%hold/buy34 229,1834 229,18
2021-01-14 15:000,82%hold/buy39 595,8039 595,80
2021-01-15 15:00-0,16%sell36 901,3836 901,38
2021-01-16 15:000,02%hold/buy37 227,1237 227,12
2021-01-17 15:00-0,57%sell34 749,3834 749,38
2021-01-18 15:00-0,09%sell36 443,1136 443,11
2021-01-19 15:000,70%hold/buy37 021,9637 021,96
2021-01-20 15:000,29%hold/buy34 901,7234 901,72
2021-01-21 15:00-0,15%sell31 100,0035 069,00
2021-01-22 15:001,14%hold/buy32 549,9332 549,93
2021-01-23 15:00-0,21%sell31 740,6831 740,68
2021-01-24 15:000,88%hold/buy32 099,3132 099,31
2021-01-25 15:000,70%hold/buy34 448,1034 448,10
2021-01-26 15:000,09%hold/buy31 291,9331 291,93
2021-01-27 15:00-0,36%sell29 540,0029 540,00
2021-01-28 15:000,96%hold/buy31 887,0531 887,05
2021-01-29 15:000,76%hold/buy37 186,5637 186,56
2021-01-30 15:000,20%hold/buy34 246,8234 246,82
2021-01-31 15:00-0,65%sell33 362,3133 362,31


The data presented by Sentimenti neither in whole nor in part constitute a “recommendation” within the meaning of the provisions of the Act of 29 July 2005 on trading in financial instruments or the Regulation of the European Parliament and the Council (EU) No 596/2014 of 16 April 2014. on market abuse (Market Abuse Regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulations (EU) 2017/565 of 25 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive. The contents do not meet the requirements for recommendations within the meaning of the above mentioned Act, inter alia, they do not contain a specific valuation of any financial instrument, are not based on any valuation method and do not specify investment risk.