The model starts with $10,000, holds BTC only after a completed daily close above SMA 200 and moves to cash after a close below it. Every change is executed at the next daily open with a 0.10% fee. Cash earns no interest.
A regime filter, not a forecast
SMA 200 does not predict tomorrow’s price. It classifies the recent regime by comparing one close with the average of the previous 200 closes.
The benefit can come from avoiding part of a prolonged decline. The cost is arriving late after a reversal and trading repeatedly when price moves back and forth around the average.
Exact rules used in the test
Signal
Use only a completed daily candle. Above SMA 200 means BTC exposure; below it means cash.
Execution
A changed signal is executed at the following day’s open, so the model never trades on information that was unavailable.
Costs
Each purchase and sale pays 0.10%. Taxes, spread and slippage are not added.
Benchmark
The same $10,000 is bought and held over the identical period, with the same entry and exit fee.
Price, account value and drawdown
Read the price chart first: yellow is SMA 200, green markers are entries and red markers are exits. Then compare both account curves and finally the depth of their declines.
BTC/USDT · 1D
2018-07-20 — 2026-09-19 · UTC
A cross above the average is not automatically a durable uptrend. Clusters of alternating markers identify whipsaw zones where fees and small losses accumulate.
$10,000 · Final value
SMA 200 filter / Buy and hold
Drawdown
SMA 200 filter / Buy and hold · %
What the full sample showed
The filter finished above buy-and-hold in this sample and reduced maximum drawdown, but it still suffered a deep decline. Moving to cash changed the path; it did not make Bitcoin low-risk.
Most closed cycles lost money. A small number of long trends paid for many false starts, which is the defining trade-off of a trend-following rule.
Maximum drawdown: -64.0%
Maximum drawdown: -76.6%
Where the result can mislead
Start-date dependence
A different launch date can change both relative return and drawdown.
Sideways markets
Repeated crossings can turn a calm-looking average into a chain of small losses and fees.
Cash assumption
The model gives cash no yield and ignores tax, spread and slippage; a real account may differ.
How to evaluate the rule responsibly
- Keep the SMA length and execution rule fixed before testing.
- Compare several start dates and untouched out-of-sample periods.
- Inspect losing cycles, not only final return.
- Decide in advance where cash is held and how custody changes when the signal switches.
Lower drawdown does not mean low risk
SMA 200 was useful here as a transparent risk-regime filter, but the evidence also exposes its price: late re-entry, frequent false signals and continued large drawdowns. The rule deserves testing, not reverence.
Data and methodology
Binance Spot daily OHLCV · BTCUSDT · UTC · 2018-07-20 — 2026-09-19
Rules fixed before calculation; next-bar execution and stated costs included