Introduction
This bi-weekly quantitative report (April 25 to May 12) analyzes Bitcoin and Ethereum market trends using key indicators like long/short ratios, open interest, and funding rates. The quantitative section explores the "Moving Average Dense Breakout Strategy" for ETH/USDT, detailing its logic, signal mechanisms, and robust performance in trend identification and risk management.
Key Takeaways
- BTC vs. ETH Performance: BTC rose ~34% while ETH surged over 60% in two weeks.
- ETH Volatility: ETH's long/short ratio fluctuated sharply, indicating strong short-term trading and unresolved bearish positions.
- Open Interest: ETH's contract holdings rose aggressively in early May, outpacing BTC's slower growth.
- Market Sentiment: Early May saw concentrated short liquidations, followed by long squeezes on May 12, revealing leveraged market divergences.
- Strategy ROI: The "Moving Average Dense Breakout Strategy" achieved 127% annualized returns with optimized parameters.
Market Overview
1. Bitcoin vs. Ethereum Price Volatility
From mid-April to early May:
- BTC: Steady climb from ~$78,000 to $105,000 (34% gain).
- ETH: Sharp rally from $1,600 to $2,600 (60% gain), outperforming BTC with higher elasticity.
Volatility Insights:
- BTC showed consistent volatility peaks in mid-April, stabilizing later.
- ETH experienced concentrated volatility spikes during breakouts, reflecting momentum-driven rallies.
👉 Track live ETH/USDT volatility
2. Long/Short Ratio (LSR) Analysis
- BTC: LSR hovered near 1, dipping below 1 on May 10, signaling skepticism despite price highs.
- ETH: Wild LSR swings during its $2,000–$2,600 rally, revealing unresolved bearish pressure.
3. Open Interest Trends
- BTC: Contract holdings grew slowly to ~$600B.
- ETH: Aggressive 33% jump to $240B in early May, attracting leveraged interest.
4. Funding Rates
Both assets maintained near-zero rates, briefly turning negative in mid-April. Gradual positivity to 0.01% indicated cautious optimism without overleveraging.
5. Liquidation Patterns
- May 8: $836M short liquidations as ETH skyrocketed.
- May 12: $476M long squeezes during corrections, highlighting volatile leverage risks.
Quantitative Analysis: Moving Average Dense Breakout Strategy
1. Strategy Overview
This momentum strategy identifies trend initiations when:
- Short-/mid-term MAs (SMA20–120, EMA20–120) converge within 1.5% of price.
- Price breaks the MA cluster’s highest/lowest line (bull/bear signal).
Key Features:
- Dynamic take-profit/stop-loss.
- Optimized for ETH/USDT 2-hour candles.
2. Core Parameters
| Parameter | Value |
|---|---|
| MA Convergence | ≤1.4% |
| Take-Profit Ratio | 10x |
| Max Drawdown | <15% |
3. Entry/Exit Conditions
Entry:
- Bullish: Price crosses above the highest MA in the cluster.
- Bearish: Price breaks below the lowest MA.
Exit:
- Stop-loss: Price reverses to the entry’s extreme MA.
- Take-profit: 10x the entry-to-MA distance.
👉 Explore ETH trading strategies
4. Backtest Results (May 2024–May 2025)
- Annualized Return: 127.59% (vs. -46.05% buy-and-hold).
- Sharpe Ratio: 2.8.
- ROMAD: 8.61 (Return on Max Drawdown).
5. Strategy Summary
Best-performing parameters:
threshold = 1.4%tp_sl_ratio = 10.
Key Insights:
- Low-threshold, high-ratio combinations capture full trends.
- Integrate volume filters to reduce whipsaws.
Conclusion
April–May 2025 revealed:
- Strong ETH/BTC rallies with undertones of caution (neutral LSR/funding rates).
- High leverage-fueled divergences (short/long squeezes).
- The MA breakout strategy’s 127% returns demonstrate efficacy in volatile markets. Pair with auxiliary indicators for enhanced robustness.
FAQ
Q: Why did ETH outperform BTC?
A: ETH’s Pectra upgrade hype and catch-up demand drove its 60% surge vs. BTC’s 34%.
Q: How does the MA strategy avoid whipsaws?
A: The 1.4% MA convergence filter ensures only high-probability breakouts are traded.
Q: What’s the biggest risk?
A: Extreme volatility events (e.g., May 12 long squeeze) may trigger stop-losses prematurely.