From its inception, the value of Bitcoin has exponentially risen. In fact, as of right now, the price of Bitcoin has risen 1457.87% this year. Now many people are questioning whether or not it’s too late to invest. And what I think people are really asking is “Can I still capitalize on this exponential growth in value?” I don’t know.

But, I do feel that there is money to be made. With the introduction of Futures, I expect the volume of Bitcoin trading to increase substantially. And with the amount of volatility that I’m seeing on a daily and weekly basis, there is theoretically money to be made buying and selling Bitcoin. I have a relatively shallow understanding of Bitcoin compared to many, but I do understand data. So, data is always my first go-to when I want to understand a topic. Building on my previous observations that the value of Bitcoin was related to the volume of internet searches of “Bitcoin”, I figured many people would be reactive to the short-term fluctuations in price of Bitcoin. So, I took a deeper look into the daily (00:00 to 23:59 UTC) data to see if I could find any trends.

So looking at the figure above, it appears that their is no linear trend between volatility and net gains the following day. But, I did notice that any day that there is greater than 12-15% volatility in price, there was subsequent net increase in price the following day. If one was attempting to time when price increased, that may be a decently successful selector criteria. For the two groups, there were:

$100.19 mean increase in price when the previous day’s volatility was >12.5%. $44.54 mean increase in price when the previous day’s volatility was <12.5%.

Most importantly, there was the following observation for the lower quartile (25th percentile) of those two groups:

$13.65 mean increase in price when the previous day’s volatility was >12.5%. -$90.22 mean DECREASE in price when the previous day’s volatility was <12.5%.

Another trend I noticed was that whenever there was a net positive percentage gain during a trading “day”, then there appears to be a higher likelihood of a net increase in price the following day as well (with the exception being all-time highs). Or more importantly, a much smaller likelihood of a large decrease in price the following day. I partitioned out Bitcoin price data over the past 3 months into two groups:

Net increase in the previous day’s price (%) Net decrease in the previous day’s price (%)

I ran a simple t-test to test for a significant difference in next day price between these two groups. The mean increase in next day price (%) was the following for each group:

1.718% Increase in price the following day, when there was a net increase in the previous day’s price (%) 0.575% Increase in price the following day, when there was a net decrease in the previous day’s price (%)

Please keep in mind, It’s difficult to distinguish what is simply due to this ongoing increase in price over time, and what is legitimate daily patterns. But, if one were hoping to hedge their bets and capitalize on Bitcoin’s current volatility, these may be helpful criteria on when to buy on a daily basis:

When the previous day’s % volatility (% change between the high and low price) exceeds 15%. If there was a net increase in price % (Close-Open) during a day.

This approach could be useful if you are attempting to buy and sell large amounts of Bitcoin. For instance, you could temporarily sell each time Bitcoin reached a new all-time high, then buy back as soon as you see a >15% volatility day. Or you could try selling some Bitcoin each day that ended in a net decrease in price, and buying back on any day that ended in a net increase in price, seemingly riding the wave of the market. This is all just splitting hairs. Alas, you could just simply use these criteria to time when to buy and hold and treat Bitcoin as a long-term investment like I do. This last approach would allow you to avoid all the headaches associated with timing daily fluctuations in price. 🙂