Quote from: Turbartuluk on Today at 10:46:41 AM

DCA can be used to spread this risk and be sure that you are at least partly invested to profit "somehow".

You are correct. I was conservative with my cut-off points, but a significant change in the Bitcoin price behavior, could make me miss the top or the bottom. Therefore I won't trade 100% of my Bitcoin and I will DCA (mainly because of banking restrictions but also to reduce risk).

Adjusting our strategy (sell at trend+750 days, buy at trend*e^-0.5) for bank account limitations.

Problem:
Peter has 1 Bitcoin. He feels comfortable trading 0.5 Bitcoin while holding the remaining 0.5 Bitcoin. The optimum strategy would be sell 0.5 Bitcoin at trend+750 days for cash and use this cash to buy back more Bitcoin at trend*e^-0.5. However selling 0.5 Bitcoin at trend+750 days would lead to an cash inflow into his bank account of 65.000 EUR far exceedingd his salary cash inflow of 2k. This will trigger anti money laundering actions from his bank. The bank might file a report to the government, block the cash inflow or require additional information from Peter about the source of the funds. Peter always remained within the law and paid his taxes in full. However he would still like to avoid the hassle of filing a lot of paper works.
He therefore doesn't want his cash inflow from selling Bitcoin to exceed 4k a month (2x his salary). As a result he can't sell his 0.5 Bitcoin for 65.000 EUR at once but would need several months to sell his Bitcoin. However the Bitcoin peak only lasts a short time. So either (i) Peter won't be able to sell his 0.5 Bitcoin in full or (ii) he will have sell his Bitcoin over several months for a lower price above trend or mixture of i and ii.

Solution:
4k a month is 1k a week, which is 3.2% of 0.5 Bitcoin at trend price of 62k. For a 3.2% weekly cash turnover bank account limit the optimal time to start selling is roughly at trend+200 days (currently 76k EUR) and the optimum time to start buying back is at trend*e^-0.3 (currently 46k EUR).

Finding the optimal valuations for buying and selling Bitcoin

We have learned that we can outperorm buy and hold by buying Bitcoin cheap in the cycle and selling Bitcoin expensive in the cycle. Best time to buy Bitcoin was at Trend*e^-0.5. Best time to sell Bitcoin was trend+750 days. How do the two limits (-0.5 and 750) change as a function of how limited our bank account turn over is relative to the value of our Bitcoin we are willing to cycle-trade.

We can be sure the limits (-0.5 and 750) will move closer to trend (e.g. -0.3 and +300) especially for severely restricted bank accounts, because we can't buy or sell all Bitcoin at the optimal moment. We have to choose a less optimal moment or not trade at all.

Backtests

We can calculate our out performance for multiple scnearios. For each bank account restriction (buy/sell X% of our tradable Bitcoin per week), we ceck for different buy and sell triggers the outperformance. The goal is to find the combinations of triggers that gives us the optimal outperformance. For the optimal combination (marked in bold) a graphical output of our backtest is shown.

Even if our bank account is severly restrictive (0.1% weekly trading) the optimum limits only go to (-0.25 and +180)

For 1%-3% trading restriction our limits are around (-0.3 and +200).

For a restriction of 5% our lower limit (-0.48) is almost at the optimum level without any restrictions (-0.5), but the sell limit is still much lower (250 instead of 750). The reason for this is, that the tops are short, but the bottoms take many days longer. For our trades to complete we therefore need to ease the restriction for selling more than the restriciton for buying.

Even if our bank account is not very restrictive and allows us to trade 10% a week our sell trigger has to be eased quite a bit from 750 to 300.

Why not use all your Bitcoin for cycle-timing?

Timing the cycle outperforms buy and hold by a wide margin, so why not use sell all our Bitcoin high and buy back low?

Safety: Do we feel comfortable owning zero Bitcoin? Selling all your Bitcoin and leaving all that money in a bank may be risiky depending on your juristiction (Libanon, Egypt, Nigeria) and your relationship to the people in power (your are known as a critic of a powerfull corrupt politician in your contry).

Privacy: You don't want to be targeted by robbers, who may hurt you and your family members to get you to transfer all your Bitcoin to them. So you don't want to spread the information how much Bitcoin you own around too much. Buying Bitcoin once, especially without KYC, checking your balances with your own node or over TOR, leaves less traces. Buying and selling all your Bitcoin every cople of years on a centralized exchange, leaves a lot of data for hacker and robbers to use.

Non Fungibility: Maybe you think some UTXOs could have lower regulatory risk, so you might only sell UTXOs with higher regulatory risk and keep UTXOs with lower regulatory risk.

-> We have to earmark which UTXOs and how many Bitcoin are we willing to sell.

Steps to perform for finding the optimal buy and the sell levels:

Estimating the maximum fiat turnover:
- How many and which bank accounts can you use?
- How much turn over each bank account can stomach each month?

Estimating maximum Bitcoin trading:
- Earmarking UTXOs for selling: which UTXO in which order would I like to sell?
- [Bitcoin earmarked for potential selling] * [Bitcoin trend price]

[Bank limit in %] = [maximum fiat turnover] / ( [Bitcoin earmarked for potential selling] * [Bitcoin trend price] )

Backtesting the optimal buy and sell limit for your [Bank limit in %]