Adrian Reid explains why Bitcoin's market dominance makes it a useful regime filter for crypto trading strategies. With only four bull-bear cycles in crypto history, he warns against over-fitting filters to past data. Instead, prioritize stability and diversify your filter parameters across different settings.
Questions this video answers
About four meaningful bull/bear cycles (speaker: "I think we said four bull and bear cycles sort of that we've got meaningfully in our data right now").
Chapters
Yeah, look, I do, I do use Bitcoin as the, the, the, the, the regime filter. There are other ways you could do it, there's other indices. But to be honest, Bitcoin dominates so much of the market cap of the entire market right now. Not all of it, but a lot of it. That, that really has been a great source of a, as a regime filter so far. Now, for exactly what indicators to use as the regime filter, that's something you're going to have to test. What I'm going to suggest is we don't have a lot of data. You know, there's, I think we said four bull and bear cycles sort of that we've got meaningfully in our data right now, something like that, depending on how you define bull and bear. And so you've got to be really careful with your regime filter not to curve fit the regime filter.
Which is a big trap, right, because let's say you have a regime filter that turns your system on and off four times.
And it works amazing. And you optimize that regime filter and you get this really great looking equity curve and you think, oh, I'm cool because I've got 500 trades in my database, but I've got a, you know, in this regime filter really makes it amazing. Actually, no, you're in real trouble here because you've optimized something on basically four data points for on offs, which is, which is a real big mistake. So for the regime filter, the important thing is to make sure that the regime filter works very broadly, no matter what the settings. And this is what I was talking about earlier, the stability of the system. You know, we've got to make sure that we're not curve fitting. And you know, maybe you have one system with a regime regime filter of X and you have another system within a regime filter setting of Y intentionally, not because X or Y is better, but because you want to build in that diversification because we don't really have enough bull bear cycles yet to properly tune a raising filter.
