Academic researchers have found that applying the efficient market hypothesis (EMH) to Bitcoin trading can generate higher profits than simply hodling.
EMH is a controversial theory that suggests an asset's share price reflects fair market value and all applicable information, making it impossible to outperform the market through timing or intuition.
Typically, proponents of EMH recommend investing in low-cost passive portfolios rather than trying to beat the market.
The research team in Greece used four artificial intelligence models trained with multiple data sets to test the application of EMH in the Bitcoin market.
After training and testing, they selected the optimal model that beat baseline returns by 297%.
This lends some credence to the idea that EMH can be a useful tool for cryptocurrency traders when it comes to avoiding market volatility.
However, the authors conducted their research using historical data and simulated portfolio management, so the results should be taken with a grain of salt.
It's also worth noting that the study focused solely on the Bitcoin market, so it may not be applicable to other cryptocurrencies.
EMH is still a contentious concept, and these findings may not sway those who strongly oppose its validity.
Despite this, the researchers believe their study provides evidence that EMH can be a potential alternative to the traditional hodling strategy.
Their research also highlights the importance of using data and models to make informed decisions in the cryptocurrency market.
These findings may be particularly useful for traders who are looking for ways to improve their returns without taking on additional risk.
EMH may also have broader applications beyond just the cryptocurrency market, as the study found that it outperformed the buy and hold strategy in simulated portfolios.
While some may argue that there are investors who have consistently beaten the market, this study suggests that the EMH approach may still have its merits.
Ultimately, the results of this study suggest that exploring alternative strategies, such as EMH, could potentially lead to higher profits for cryptocurrency traders.