Crypto Analysis | BTC-Moon Connection Overestimated?

Good day Hiveians!

Join me in analyzing the crypto markets!

 

I have been looking into the BTC Moon Cycle Connection

And have been quite impressed with what I first dismissed as esoteric nonsense. The claim: BTC follows the moon cycle. In a new moon phase BTC goes up towards the end of that phase and just the reverse for the full moon. In my posts covering this I calculated a 80%-90% hit rate for the new moon phases (when you'd want to invest):

Conservatively we then get for the green phases: 4 misses out of 20 cycles. Which means 16 out of 20 were right. Hence the 80% hit rate. If we dismiss the blue Xs this gives us even only 2 misses or a 90% hit rate!

That is crazy! While I doubt anybody knows the reason for this amazing correlation, it could also be a spurious correlation. There are many things that correlate with each other by chance. As it is a bit of work to check this connection I also checked it for 2021 and 2022. Today I wanted to go a bit further back to 2020. Is the connection still holding up?

If you look at the chart closely you can actually see that the relationship deteriorates quite a bit. For 2020 the correlation is basically almost 0. We had 12 "green" phases and 5 of them had a correlation going in the wrong direction. This means that 7 of 12 were right or a chance of 58% of being successful with using this method.

When we look at the 2 and a half years, we see that 23 out of 61 were wrong, which means that on average 63% of the time one would be lucky. Not too bad still, but what about the green phases where one would be betting? If we use the black Xs we get 7 out of 31 or 78%. With the blue Xs we get 11/31 or 65% (which is pretty low). As a reminder, the blue Xs mean that the cycle would have been correct if one waited for 2-3 days longer. So the conservative estimate would include them. Therefore one would only have a 65% success rate. This is much lower than the previous calculated 80% success rate for 2021 and 2022.

So why was 2020 so "bad"? Or why was the relationship so good in 2021? It should be pointed out that the BTC-Moon Cycle connection was popularized at the peak of its success: in spring of 2021. There we had 10 consecutive phases that were correct.

My hunch is that if were to do this for 2019 and 2018 the "hit rate" would probably go even lower, perhaps to 55-60%.

Conclusion

Looking at more data, it seems that the BTC-Moon cycle connection is overestimated. It is still curious as to why there is a fairly good fit with the data, but it is a well known fact that there are many spurious correlations in the world.

However, I'll still keep monitoring this connection and keep you updated :)

 

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As a general reminder: Please keep in mind that none of this is official investment advice! Crypto trading entails a great deal of risk; never spend money that you can't afford to lose!

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