Z-Score Adaptive SMA100 2x/Cash Strategy

Core Logic

Trend detection (SMA100) determines entry/exit. Z-score volatility determines position size.

Entry Condition

BTC Daily Close > SMA100 × 1.02

• • Uses Binance BTCUSDT daily candle, UTC 0:00 close
• • SMA100 = Simple average of last 100 daily closes
• • × 1.02 = 2% buffer — price must exceed MA by 2% to trigger entry
• • Purpose: Avoid whipsaw from price bouncing around the moving average

Why 2% Buffer?

2% buffer cuts trades from 13/year to 5/year while actually improving returns.

Exit Condition

BTC Daily Close < SMA100 × 0.98

• • Price must drop 2% below the moving average to trigger exit
• • After exit: hold 100% cash (0x), no operations
• • Wait for the next entry condition to re-enter

Z-Score Leverage Calculation

When in market, leverage is adjusted daily based on the Z-score of the 30-day annualized volatility relative to its 365-day rolling history.

Step 1: Volatility

daily_returns = last 30 daily log-returns (close-to-close)
vol_30d = stdev(daily_returns) × sqrt(365)

Step 2: Z-Score

μ = mean(past 365 days of daily vol_30d)
σ = stdev(past 365 days of daily vol_30d)
z = (vol_30d - μ) / σ

Step 3: Leverage

if z ≤ 0.3:
    leverage = 2.0
elif z ≥ 2.0:
    leverage = 0.0  (exit)
else:
    leverage = 2.0 - 2.0 × (z - 0.3) / (2.0 - 0.3)

Z-Score → Leverage Reference Table (2025 example: μ≈42%, σ≈12%)

Why Z-Score Instead of Fixed Thresholds?

BTC's absolute volatility has structurally declined as market cap grew:

Fixed thresholds (vol < 40% = max leverage) would almost always trigger max leverage in 2024, but almost never in 2017. Z-score uses a rolling 365-day window, automatically adapting to the current volatility regime so it correctly distinguishes "low" from "high" in any era.

Trading Fees

Each leverage adjustment (change > 0.01x) incurs a 0.1% fee on the exposure change:

fee = portfolio_value × |new_leverage - old_leverage| × 0.001

8.3-year simulation total fees: ~$115K (from $10K initial)

Daily Operation Flow

Every day at UTC 0:00:

1. Get BTC daily close price
2. Calculate SMA100 (average of last 100 daily closes)
3. Check entry/exit:
   ├─ Currently out + Close > SMA100 × 1.02 → ENTER
   ├─ Currently in  + Close < SMA100 × 0.98 → EXIT to cash
   └─ Otherwise → Hold current position
4. If in market:
   ├─ Calculate past 30-day annualized volatility (vol_30d)
   ├─ Calculate past 365-day vol_30d mean (μ) and stddev (σ)
   ├─ Compute z = (vol_30d - μ) / σ
   ├─ Apply formula to get target leverage
   ├─ If leverage change > 0.01x, deduct 0.1% fee
   └─ Adjust position to target leverage

Applicable Trading Instruments

Achieving Non-Integer Leverage

Example: target 1.25x leverage with $100K total:

Buy $75K IBIT (1x) + $25K BITU (2x)
Effective leverage = 0.75 × 1 + 0.25 × 2 = 1.25x

Quick reference:
  1.5x → 50% IBIT + 50% BITU
  1.0x → 100% IBIT
  0.5x → 50% IBIT + 50% cash

Historical Performance (2017/8 – 2026/3)

Overall Performance (incl. 0.1% fees)

vs Fixed Threshold Version

Z-Score v2 delivers +79.0% CAGR with lower max drawdown (-56.2% vs -57.9%) and the best risk-adjusted ratio of 1.44 across all strategies tested.

Trade Statistics

Why This Strategy Works

Risks & Limitations

Strategy Comparison

Risk-adjusted ratio 1.44 is the highest across all tested strategies. Even the worst possible entry point yields +37.2% CAGR.