Backtest SPY-BTC (GBTC IBIT FBTC BTCO ARKB)

SPY and Bitcoin (BTC) can, from 2024, share space in your stock account, from the approval of several ETFs (including GBCT, IBIT, FBTC, BTCO and ARKB) designed to emulate the behavior of the largest of cryptocurrencies.

It is now easier to use BTC to try, with a portion of your portfolio, to outperform the S&P 500 (SPY), controlling its risks.

In this report, we look at backtesting 2018-2022 and the returns and risks of 2023.

You will always find up-to-date data on Bitcoin and SPY at the following link:

Before analyzing 2023, we evaluated the 5-year period between the beginning of 2018 and the end of 2022.

In two of those years (2018 and 2022), the market (SPY) registered declines (up to 20%), and in the remaining years it grew (up to 29%)

Bitcoin had its highest extremes in 2020 (+303%) and 2018 (-75%). It also suffered the effects of the market crash in 2022, down 64% that year.

Let’s watch the video, looking not only at the returns but also at the risks (volatility).

As you may have noticed, we added an additional investment to the analysis, which we call AL COIN. It is the result of applying aggressive and defensive strategies to the portion of our portfolio that we allocate to Bitcoin.

Each of those strategies was converted into a set of 12 algorithms, designed to provide better risk-return ratios than the market, the S&P 500 index.

This is achieved by variing, according to market conditions, the mix between Bitcoin and Cash that we apply for the portion of our portfolio that we decide to allocate to invest in Bitcoin.

The maximum we can invest in Bitcoin is 100% of the amount we decide to invest in this asset.

When market trends tell us that prices are falling, we adopt defensive strategies.

What do they consist of?

Very easy, in selling a part of our BTC position and temporarily leaving it in Cash. Until the market tells us to be more aggressive.

But we don’t buy or sell 100% of the portfolio based on price changes over a given timeframe.

We divide our decisions.

The percentage of Cash is determined by tiered decisions, based on market conditions over different timeframes.

That is the function of each of the 12 algorithms that make up AL-500, whose application to Bitcoin we call AL COIN.

Risk control is automatically generated by the tiered buy or sell decisions produced by the 12 algorithms.

Only when we have 100% of the portfolio invested in BTC, do we share its risk.

The rest of the time, our position in Cash, whose volatility is zero, ensures that we invest with less risk than the investor who always keeps his investment in Bitcoin.

The data for the last year (2022) is very illustrative. With drops of 19% and 64% in SPY and BTC, AL COIN fell 31%.

And what about the volatility? Compared to SPY’s 19%, BTC’s came in at 68%. Instead, risk control on AL COIN capped its volatility at 34%, half of BTC.

When we look at 3 and 5 years, the results are surprising. AL COIN vastly outperforms Bitcoin’s returns, with much lower risks.

Then, when checking its operation in 2023, we find shocking numbers again. In the year of market recovery, the returns and risks were as follows: SPY +24/20 – AL COIN +105/31 – BTC +153/56.

In the most in-depth, 3-year and 5-year analyses at the end of 2023, we again find higher returns of AL COIN against Bitcoin, with lower risks.

We can also observe that, due to Bitcoin’s very high volatility, even limiting its risks through AL COIN, we continue to have more risk than the market. The same is true for highly volatile stocks, such as Tesla. This issue should be highlighted when defining what portion of our portfolio we allocate to high-volatility investments.

Click on the link below if you want to receive free trading alerts to find out what the algorithms indicate about investing in Bitcoin and its GBCT, IBIT, FBTC, BTCO and ARKB ETFs:

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