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I backtested a strategy that trades bitcoin, but I'm not sure if it's worth doing it because of the recent strong trend of bitcoin. The buy-and-hold has a better return, Sharpe ratio of the strategy looks good, but it gives a negative Sharpe ratio if I take bitcoin returns into account as a benchmark.

Any input would be greatly appreciated.

for your reference, https://github.com/nkaz001/market-making-backtest

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  • $\begingroup$ Have you tried to backtest your strategy from mid-2018 till 2020? From mid-2018 till approx April 2019, bitcoin was trading more or less sideways (this is exaggerated a bit, since bitcoin has immense amount of volatility), thus not having a defined long-term trend. There's a lot of speculation going on in bitcoin and if you're a private investor, who believes in bitcoin, then it would be better (long-term) to simply buy and hold bitcoin and not implement your trading strategy, which might falter due to transaction cost, slippage, or other unknown market effects (it depends on your strategy). $\endgroup$ – Pleb Jan 21 at 14:59
  • $\begingroup$ Thanks for your comment. The problem is that I wasn't able to find data before 2019 that I need to backtest my strategy. So I was wondering how to evaluate a strategy with limited data. $\endgroup$ – kaz Jan 25 at 12:22

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