Cryptocurrency market: an empirical study of portfolio optimization and technical analysis

Historical stock prices are used to predict the direction of future stock prices. After reviewing the basics of stocks prediction, statistics, portfolio and cryptocurrency theory, we develop a trading strategy using technical analysis indicators. The strategy is then backtested on historical prices. We then compare it to a Markowitz’s portfolio optimization model. Based on the investment strategy simulations, we noticed that some of the indicators successfully and consistently outperform the buy and hold strategy on the cryptocurrencies studied. Furthermore, even though Markowitz’s portfolio optimization model doesn’t outperform technical indicators strategies, it does yield greater returns than a simple equal allocation portfolio. Thus, we can conclude that the strategy could successfully be implemented as a investment strategy or be used as a based for algorithmic trading.