Crypto Market Cycle Analysis: Strong Prices but Cautious Sentiment, "Dense Moving Average Breakthrough Strategy" Annualized Return of 127%

From late April to mid-May, the crypto market exhibited characteristics of "price increases but differing sentiments." Bitcoin and Ethereum prices rose simultaneously, with Ethereum experiencing a larger increase and more volatility. The long-short ratio and funding rates did not show a significant bias towards the long side, indicating limited market enthusiasm for chasing prices. Contract positions continued to climb, with concentrated short liquidations at the beginning of May, followed by long positions facing reverse liquidations, reflecting heightened market divergence under high leverage. Overall, despite the strengthening prices, market sentiment and capital momentum have yet to align, and caution is needed regarding risk control and timing during operations.

The quantitative analysis section of this report adopts the "Moving Average Convergence Breakout Strategy" and conducts systematic parameter optimization and backtesting on the ETH/USDT 2-hour data. This strategy achieves an annualized return of up to 127.59%, significantly outperforming the -46.05% of the buy-and-hold strategy for ETH during the same period. The strategy demonstrates good trend-following capability and drawdown control by capturing momentum structures and filtering trends.

The core logic of the strategy is to observe the convergence of multiple short to medium-term moving averages (such as the 5-day, 10-day, 20-day, etc.) to determine whether the market is in a consolidation phase. When the moving averages are closely packed and the price breaks through, it is considered a signal for trend initiation. At the same time, a dynamic take-profit and stop-loss mechanism is set up to control risk.

The optimal parameter combination is:

• percentage_threshold = 1.4 (maximum distance limit for moving averages)
• tp_sl_ratio = 10 (dynamic take profit range)
• short_period = 6, long_period = 14 (moving average observation period)

This parameter combination performed excellently in backtesting from May 1, 2024, to May 12, 2025, with an annualized return of 127.59%, a maximum drawdown of less than 15%, and a risk-adjusted return of (ROMAD) up to 8.61%.

The strategy demonstrates high profitability and risk control in capturing the mid-term volatility structure of ETH. It is recommended to set the threshold parameter between 1.3 and 1.5, and the tp_sl_ratio within the range of 9 to 11, to achieve a relatively stable risk-reward ratio. In the future, it may be considered to combine volume screening and oscillation filtering mechanisms to further enhance the strategy's adaptability in different market conditions.

It is important to note that quantitative strategies may be affected by factors such as severe market fluctuations, extreme market conditions, or signal failures during actual operations. Investors are advised to combine other quantitative factors and risk control mechanisms when applying these strategies to enhance their stability and adaptability, while maintaining a rational judgment and a cautious approach.