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OG-CAT: A Novel Algorithmic Trading Alternative to Investment in Crypto Market

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Abstract

Cryptocurrencies have emerged as a good tool for investment/trading in the last decade. The investors have achieved promising gains with the long-term investments made at reasonably good price/time. However, investment in cryptocurrencies is also exposed to extremely high volatility. Due to this, the investment may suffer from a high drawdown as the price may fall. In this work, we proposed optimized Greedy-cost averaging based trading (OG-CAT) a novel trading framework as an alternative to long-term investment in cryptocurrencies. The approach exploits the wavy structure of the price movement of cryptocurrencies, the high volatility of price, and the concept of cost averaging. Furthermore, the parameters of the approach are optimized with the simulated annealing algorithm. The approach is evaluated on the two prominent cryptocurrencies: bitcoin and ethereum. During the evaluation, OG-CAT not only outperformed the buy-and-hold investment approach in terms of profit but also demonstrated a lower drawdown. The profit percentage in the case of trading BTC with OG-CAT is 1.63 times more and the max drawdown is 1.62 times less than compared to the buy-and-hold strategy.

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The authors declare that no funds, grants, or other support were received during the preparation of this manuscript.

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SSK, PS and NKG contributed to the study conception and design. Data collection, implementation and analysis were performed by SSK under the guidance of PS and NKG. The first draft of the manuscript was written by SSK and all authors commented on previous versions of the manuscript. All authors read and approved the final manuscript.

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Correspondence to Parvinder Singh.

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Khurana, S.S., Singh, P. & Garg, N.K. OG-CAT: A Novel Algorithmic Trading Alternative to Investment in Crypto Market. Comput Econ (2023). https://doi.org/10.1007/s10614-023-10380-9

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  • DOI: https://doi.org/10.1007/s10614-023-10380-9

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