Developments in the cryptocurrency market continue to attract attention in various fields. According to a recent article published by a team of academic researchers from the International Hellenic University and Thrace Democritus University in Greece, they support the Efficient Market Hypothesis (EMH) for Bitcoin trading.
Notable Developments in Investment Strategies
EMH is a controversial theory claimed to contribute to the development of models that can outperform the hodl strategy by approximately 300% in simulated cryptocurrency portfolios. Recent research articles summarize this situation as follows:
“We have managed to produce models that allow investors to achieve higher profits than what they would obtain by following the well-known buy and hold strategy.”
The fundamental principle of EMH is based on the idea that the stock price representing any asset reflects its fair market value and all relevant market information. If this hypothesis is true, it is impossible to outperform the market by timing or intuitively predicting prices based on winning stocks.
Generally, EMH supporters advise investors to allocate their funds to low-cost passive portfolios instead of attempting to beat the market with well-timed low-value stock selections.
Research Results Sparked Controversies
In response to the article, critics of EMH rejected this line of reasoning by pointing to the careers of investors like Warren Buffett, who have made a name for themselves by beating the market. According to the research team in Greece, whose observations in the Bitcoin market are limited, EMH can be applicable in the cryptocurrency sector as an alternative to the standard buy and hold or hodling approach to protect against market volatility.
To test their hypotheses, the researchers developed four different artificial intelligence models trained with multiple datasets. After training and testing, models optimized against both “beating the market” and hodling strategies were selected by the researchers.
According to the researchers, the most suitable model achieved returns of up to 297%. This adds some confidence to the idea that the EMH hypothesis could be a useful tool for Bitcoin and cryptocurrency investors. It is worth noting that the authors conducted their research using past data and simulated portfolio management.
