🔎 Beyond Bitcoin: Why Algocrat AI Thrives Regardless of Market Trends [Strategy Analysis]

After the last post, a few clients asked us to elaborate further on the correlation aspect.

How can it be that there is zero correlation between Algocrat AI results and Bitcoin dynamics?

After all, Algocrat seems to trade trends, right? It should have some correlation - for instance, performing better during an uptrend dynamic, making the overall correlation at least slightly positive.

Well, not quite.. let's dive deeper into this topic.

The first misconception about Algocrat is that it’s a trend-following system.

What is trend-following in simple terms?

It's buying when the price is moving up significantly and selling when it goes down.

This means staying in the market most of the time, going either long or short depending on the prevailing trend. Such systems perform well during trending market periods and on trending instruments, such as Bitcoin.

Our team has developed similar systems and observed their results from other developers. Practice shows that while these systems can outperform Bitcoin over the long term, they fail to outperform Algocrat.

More importantly, they depend heavily on the overall market trend. If there is no significant trend in either direction, they tend to lose money. These periods of sideways movement can last for months.

For instance, we recently had over six months of sideways movement, from mid-March until November’s Trump rally.

Algocrat AI achieved a +150% gain during these months, even though the market wasn’t trending. Such results would be impossible for any trend-following system in the absence of a trend

What's Algocrat AI's strategy?

It’s a diversified portfolio of (mostly) intraday trading systems that capture short-term market dynamics.

We do not rely on sustained trending movements. Instead, we exploit short-lived momentum market inefficiencies when there is a high probability of capturing them.

This means we do not stay in the market all the time. This short-term approach is more sophisticated and tricky than typical trend-following systems.

To remain consistently profitable in the long run, we must be precise with our entries, whereas trend-following focuses more on staying in the market during trends.

The advantage of this short-term approach (apart from being more profitable for deposits under a billion dollars) is that we can generate returns even when the market is stagnant, thanks to these intraday movements.

What's the downside?

Limited scalability.

This approach can manage a few dozen million dollars but not hundreds of millions or billions.

Conversely, trend-following on a liquid pair like Bitcoin can handle significantly larger sums, even in the billions

Since our focus is on maximizing profitability for relatively small amounts, up to a few dozen million dollars, it makes sense to stick with this short-term approach.

Scalability then is irrelevant to us because we are not managing billions of dollars.

On the other hand, trend-following has a major downside: its performance is tied to the “fate” of the instrument being traded.

While the instrument trends, trend-following systems perform well, but during non-trending periods, they lose money.

This creates a significant correlation and coefficient of determination (R^2) between the system and the underlying asset, such as Bitcoin. While correlation is well-known, R^2 is less familiar to the general audience.

Simply put, R^2 explains the percentage of a trading system’s returns that can be attributed to the underlying asset’s dynamics.

For example, an R^2 of 0.5 means that 50% of all returns are explained by Bitcoin’s market behavior.

Trend-following systems often have R^2 values of 0.5 or higher.

In contrast, short-term intraday systems are not dependent on overall market dynamics, so they typically exhibit R^2 values close to zero.

📊 Why Avoiding Choppy Markets Could Cost You Profits [Strategy Analysis]

Hi,

Lately, we've seen a surge in pause and disconnection requests, along with many traders asking whether it’s better to step aside and wait for a clearer opportunity.

The truth? Nobody can predict with certainty whether pausing will yield better results.

However, from a statistical standpoint, stopping trading just because the market is range-bound is usually a mistake.

Why? Because markets love to break out of narrow ranges, and Algocrat AI systems are designed to capitalize on these breakouts.

Narrow trading ranges are rare in crypto, and filtering them out often leads to missed profits.

Let’s take an example:

In August 2023, Bitcoin moved sideways for several weeks, similar to what’s happening now. Many traders might have thought it was wise to pause trading.

However, when the market finally broke out, over 60% of the profits were made in just two days as Bitcoin tanked. Had we paused, we would have missed out on these massive gains.

This isn’t an isolated case - it’s how markets typically work. Algocrat AI's systems already incorporate market-timing mechanisms, making manual interventions like pausing unnecessary and often counterproductive.

While it’s possible to filter out some losing trades by stopping during consolidations, systematically doing so leads to missing recoveries and the best trading days of the year, ultimately lowering long-term profitability.

We’ve tested countless timing strategies, and the best ones are already implemented. Every day, we explore new ways to refine our systems, and we’ve long since tested and discarded the idea of staying out during narrow ranges.

If it worked, we would have already adopted it. If it hasn’t been implemented, it’s because it doesn’t work. Simple as that.

Trading success isn’t about avoiding every short-term risk - it’s about consistently executing a proven strategy over time.

The market rewards discipline and data-driven decisions, not hesitation. If you stay in the game, you let the probabilities work in your favor.

By staying the course, you ensure that you’re positioned to capture the biggest opportunities when they arise.

Hope you find this valuable!

Best,
The Algocrat AI Team

🔒 "Are My ByBit Funds Safe?" [Market Analysis]

As you've probably heard, ByBit was hacked for approximately $1.4 billion worth of ETH yesterday.

This ranks among the largest hacks in history, crypto or otherwise.

Yet, despite the scale of the incident, ETH has barely reacted, and today we are seeing a strong reversal, recovering yesterday's losses.

Additionally, all available reports suggest that ByBit is successfully managing the situation.

As an indicator of confidence, the **Polymarket ByBit insolvency market** is currently trading at a 4% probability, continuously decreasing.

Is the market going to fall further?

Nobody can predict the future, but if this event were going to trigger a major sell-off, it likely would have already happened.

The day of the event presented a real risk, which is why Algocrat AI systems were shorting the market.

While they ultimately exited with a small loss, they were positioned to capitalize on a potential downturn.

However, no system wins every trade - nor should that be the goal. Risk management and strategic positioning remain the priority

How has it handled?

ByBit CEO Ben Zhou demonstrated a masterclass in transparency.

He stayed up all night, actively updating his X (formerly Twitter) account with details about the hack and even shared his fitness tracker stats from the day and night following the breach.

This is exactly how such situations should be handled - openly and responsibly.

What are we doing with our ByBit funds?

We haven't moved them. While there remains a small chance of ByBit insolvency, we consider it negligible.

For now, we remain confident in ByBit’s ability to manage the aftermath and continue operations smoothly.

Best,
The Algocrat AI Team