Preface
This quantitative biweekly report (from April 25 to May 12) analyzes the market trends of Bitcoin and Ethereum through comprehensive application of long/short ratios, contract positions, and funding rates. The quantitative section discusses the "Moving Average Dense Breakthrough Strategy" in the ETH/USDT market, covering its logical architecture and signal determination mechanism. Through systematic parameter optimization and backtesting, the strategy demonstrates robust performance in trend identification and risk control, with clear execution discipline, outperforming simple ETH holding operations and providing a practical framework for quantitative trading.
Summary
• In the past two weeks, BTC and ETH rose simultaneously, with BTC increasing by approximately 34% and ETH rising over 60%.
• ETH's long/short ratio fluctuated dramatically, indicating that ETH's rise was accompanied by strong short-term trading and market speculation, with shorts not clearly exiting.
• BTC's contract position amount increased relatively slowly, while ETH showed a more robust increase in early May.
• The overall contract market saw shorts concentrated liquidation in early May, with longs experiencing reverse liquidation on May 12, reflecting intensified market divergence under high leverage.
• Quantitative analysis using the "Moving Average Dense Breakthrough Strategy" achieved a return rate of up to 127% under optimal parameter selection.
Market Overview
1. Price Volatility Analysis of Bitcoin and Ethereum
(The rest of the translation follows the same professional and precise approach, maintaining the original structure and technical terminology while translating into clear English.)Accompanied by price increases and growth in contract position amounts, the funding rates of both sides gradually turn positive, maintaining between 0% and 0.01%, reflecting the gradual dominance of Longing and a market tendency towards active position building. However, overall, the funding rates have not continuously soared, indicating that leveraged Longing sentiment has strengthened but not overheated, with market sentiment remaining moderately optimistic. 【 5 】【 6 】
Figure Six: BTC and ETH funding rates gradually turn positive, maintaining between 0% and 0.01%, reflecting the gradual dominance of Longing and a market tendency towards active position building
5. Cryptocurrency Contract Liquidation Chart
According to Coinglass data, since mid-April, the contract liquidation situation in the cryptocurrency market has shown a mixed Short and Longing pattern, with Short liquidation amounts being particularly significant in early May. Especially on May 8th, the Short clearing amount surged dramatically, reaching $836 million in a single day, indicating that market prices rose rapidly, forcing massive Short positions to be liquidated.
On May 12th, as market volatility intensified, Longing liquidation amounts significantly increased, reaching $476 million in a single day, showing that some high-position Longing traders could not withstand the volatility and were liquidated in the opposite direction. This phenomenon demonstrates that although the overall trend leans Longing, the short-term market still experiences intense fluctuations, with Shorts and Longs being defeated at key points, and the contract market remaining highly active with concentrated risks.
This trend echoes the previously mentioned price increases, growth in contract position amounts, and positive funding rates, reflecting the phenomenon of concentrated Short liquidations when breaking key price levels, forming a Short-term Longing advantage. However, even in an upward market, Longing positions can still be liquidated at local highs, especially during the mid-May market volatility, where Longing positions faced significant risks, showing that market volatility remains intense, and the characteristics of high leverage and risk hedging in contract trading are still very apparent. 【 7 】
Figure Seven: On May 8th, Short liquidation amount surged dramatically, reaching $836 million in a single day
The backtesting period is from May 1, 2024, to May 12, 2025, during which this parameter group performed excellently, with an annualized return rate of 127.59%, maximum drawdown below 15%, and ROMAD reaching 8.61%, demonstrating the strategy's stable capital appreciation ability and effective downside risk compression.
As shown in the figure, the strategy significantly outperformed ETH's Buy and Hold strategy (-46.05%) over the past year, especially during periods of increased market volatility or trend reversal, showcasing excellent profit-taking and re-entry mechanisms with notably better drawdown control compared to passive holding.
We also conducted a horizontal comparison of the top five performing parameter groups, with the current combination achieving the best balance between returns and stability, possessing strong practical application value. In the future, we can further incorporate dynamic threshold adjustment mechanisms or add trading volume and volatility screening logic to enhance adaptability in oscillating markets and expand deployment across multiple currencies and cycles.
Figure Eleven: Comparison of Cumulative Returns of Five Optimal Parameter Strategies and ETH Holding Strategy over the Past Year
5. Trading Strategy Summary
The "Moving Average Dense Breakthrough Strategy" is a trend-based momentum strategy designed around the dynamic aggregation state of multiple short-to-medium-term moving averages, capturing key turning points before market initiation by detecting moving average convergence and price breakthrough behaviors. This strategy integrates price structure judgment and dynamic profit-taking mechanisms, effectively participating in short-to-medium-term trend waves while controlling drawdown.
In this backtesting, we used ETH/USDT as the target, employing 2-hour K-line data for systematic grid parameter optimization, covering 23,826 parameter combinations. The backtesting period was from May 1, 2024, to May 12, 2025, ultimately screening the top five parameter groups based on return and risk control performance, analyzing performance through annualized return rate, maximum drawdown, Sharpe ratio, and ROMAD. The best strategy combination is: percentage_threshold = 1.4, tp_sl_ratio = 10, with an annualized return rate of 127.59%, maximum drawdown controlled below 15%, and ROMAD reaching 8.61%, significantly outperforming the ETH Buy and Hold benchmark (-46.05%).
From the parameter distribution, the best performances are concentrated in low threshold values and medium-to-high tp_sl_ratio intervals, indicating that detecting dense moving average structures in the early market formation and moderately expanding profit-taking space helps capture complete trend waves. Conversely, when threshold is set too high or the profit-taking ratio is too low, the strategy is more likely to fall into frequent entries and exits and premature exits, thereby lowering overall return rates.
Overall, this strategy demonstrates extremely high return and risk control efficiency in ETH's medium-term volatility structure, with stable strategy logic and parameter adaptation flexibility, possessing high practical potential. Based on the parameter distribution characteristics in this backtesting, combinations with threshold between 1.3 and 1.5 and tp_sl_ratio between 9 and 11 show more stable return and risk control performance across various performance indicators, reflecting the strategy's strong ability to capture early trend momentum and sustain wave profits. Additionally, incorporating trading volume screening and oscillation filtering mechanisms can further enhance the strategy's adaptability and robustness across different market conditions, expanding its cross-market deployment space.
Summary
From April 25 to May 12, the cryptocurrency market presented a structural characteristic of "strong price uptrend with cautious sentiment". BTC and ETH rose simultaneously, with ETH showing larger and more volatile gains. The long-short ratio and funding rates did not significantly lean bullish, indicating limited chasing momentum. Contract positions continued to rise, with shorts experiencing concentrated liquidations in early May, followed by longs facing reverse liquidations on May 12, reflecting increased market divergence under high leverage. Overall, while prices strengthened, market sentiment and capital dynamics have not yet aligned, making risk control and timing crucial.
The quantitative analysis using the "Moving Average Dense Breakthrough Strategy" conducted systematic parameter optimization and performance evaluation, achieving an annualized return rate of 127.59% in ETH/USDT 2-hour data, far surpassing the -46.05% of the ETH Buy and Hold strategy during the same period. The strategy demonstrated excellent trend-following capability and drawdown control through momentum structure and trend filtering. However, in actual operations, it may still be affected by market oscillations, extreme market conditions, or signal failure, so it is recommended to combine other quantitative factors and risk management mechanisms to enhance strategy stability and adaptability, and to make rational judgments with caution.
References:
1. gate.io, https://www.gate.io/trade/BTC_USDT
2. gate.io, https://www.gate.io/trade/ETH_USDT
3. Coinglass, https://www.coinglass.com/LongShortRatio
4. Coinglass, https://www.coinglass.com/BitcoinOpenInterest?utm_source=chatgpt.com
5. gate.io, https://www.gate.io/futures_market_info/BTC_USD/capital_rate_history
6. gate.io, https://www.gate.io/futures/introduction/funding-rate-history?from=USDT-M&contract=ETH_USDT
7. Coinglass, https://www.coinglass.com/pro/futures/Liquidations
8. glassnode, https://studio.glassnode.com/charts/ba1ec93d-85 f 4-41 fe-5606-798 a 2 f 3001 3a? s= 1679144783&u= 1742303183
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Disclaimer
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