Oxido Solutions’ Trend Classification System: A Deep Dive into Market Dynamics
1. Introduction
At Oxido Solutions, we recently carried out a beta analysis to see how our low-risk multi-strategy for Bitcoin Perpetual Futures on Binance Futures—one of the top crypto derivatives exchanges—performs in response to Bitcoin price movements. Bitcoin Perpetual Futures are derivative contracts that let traders speculate on Bitcoin’s price without owning the asset. They don’t have an expiration date, making them flexible for traders.
Our analysis focused on how closely our strategy’s performance aligns with Bitcoin’s price movements. Does it mirror Bitcoin, remain unaffected, or behave independently? The results showed little correlation. For example, sharp Bitcoin price swings don’t necessarily result in equivalent performance changes in our strategy. Often, the strategy delivers outcomes that diverge significantly from Bitcoin’s behavior.
To understand this relationship better, we developed the Trend Classification System (TCS). This system categorizes Bitcoin’s price movements and market conditions into structured patterns, making it easier to evaluate performance across different scenarios. TCS isn’t just for us—it has potential value for other parties in crypto and traditional markets.
What You’ll Learn in This Blog:
- The market conditions we analyzed and why
- Real-world examples of the market conditions
- How TCS applies to different stakeholders
- Next steps for Oxido Solutions and TCS
2. Understanding Market Conditions
To understand how Oxido Solutions’ Trend Classification System (TCS) delivers its insights, we first need to explore the data. By studying Bitcoin’s price behavior over a multi-year period, we’ve identified patterns that help demystify its market movements. This structured approach allows us to evaluate not just BTC’s performance but also how trading strategies like ours operate under different market conditions.
2.1. Data Overview
Our analysis focused on Bitcoin’s daily price data from January 2020 to October 2024, sourced from Yahoo Finance. This timeframe highlights a variety of key market events that shaped Bitcoin’s performance and volatility, such as:
- COVID-19 Crash (March 2020)
Bitcoin’s price dropped below $5,000 as markets around the world reeled from pandemic-driven uncertainty and panic. - Bull Run and Institutional Interest (Late 2020 – Early 2021)
Bitcoin broke past $20,000 for the first time, driven by high-profile investments from companies like Tesla and MicroStrategy, as well as growing adoption as a digital asset. - China’s Mining Ban (Mid-2021)
A crackdown on mining activity in China led to sharp market corrections and a temporary decline in Bitcoin’s hash rate, impacting overall market sentiment. - Collapse of Terra Luna (2022)
The crash of Terra Luna and its ripple effects, including the bankruptcy of Celsius and Three Arrows Capital, created a wave of volatility and financial losses across the crypto market. - Bitcoin Spot ETF Buzz (2023)
Optimism surged when BlackRock and other financial giants filed for Bitcoin spot ETFs, signaling growing institutional interest and potential regulatory progress. - Post-ETF Momentum (2024)
Bitcoin’s price recovery was fueled by expectations of ETF approvals and innovations like Layer 2 solutions, including the Lightning Network, that reinforced Bitcoin’s role in the digital economy.
By leveraging this dataset, we were able to analyze Bitcoin’s behavior across different market conditions, helping us build a strong foundation for future evaluations.
2.2. Breaking Down Market Trends
To better understand Bitcoin’s price behavior and its impact on trading strategies, we developed an algorithm (using Python) to classify market trends.
LET’s MEET
2.2.1. Main Categories
To make sense of Bitcoin’s diverse market behavior, we grouped its price movements into three main categories: Regular, Semi-Regular, and Irregular Trends. By breaking down Bitcoin’s behavior into these categories, we created a structured framework that makes it easier to identify patterns, analyze market conditions, and predict potential outcomes.
In the table below, each category is paired with a clear description.
| Main | Description |
|---|---|
| Regular Trends | Compares current price movements to historical volatility, helping identify if the market is calm, moderately active, or highly unpredictable. |
| Semi-Trends | Measures the frequency of extreme price jumps (very high or low) in a given time period. Higher values indicate more unusual, significant movements. |
| Irregular Trends | High volatility and unpredictable price swings. Reflects extreme market events or speculative activity, making them challenging for most strategies. |
2.2.2. Subcategories
We broke down BTC’s market movements into detailed subcategories under the three main categories. This approach helps us capture specific patterns in Bitcoin’s performance, from steady trends to sharp volatility spikes. By diving deeper, we can make sense of how these trends shape market conditions and impact trading strategies.
In the table below, each subcategory is paired with a clear description and a real-world event. These examples ground the analysis in actual market scenarios, making it more relatable and easier to understand how Bitcoin’s behavior translates into real outcomes. This structure is not just theoretical—it connects market trends to events traders remember and strategies they can use.
| Main | Sub | Description | Example |
|---|---|---|---|
| Regular | Strong Trend | Consistent up or down movements with few reversals. | Tesla’s $1.5B Bitcoin Purchase (Feb 2021) |
| Regular | Weak Trend | Less consistent direction, moderate volatility. | Post-FTX Recovery Period (Dec 2022 – Jan 2023) |
| Regular | Range-Bound Market | Prices bounce between defined support and resistance levels. | Pre-Halving Period (Jan-Feb 2024) |
| Semi | Consolidation | Sideways price movements within a range, often before a breakout. | Summer 2023 Accumulation (Jun-Jul 2023) |
| Semi | Zig-Zag Movements | Frequent reversals with medium volatility. | ETF Speculation Period (Oct-Dec 2023) |
| Semi | Flag and Pennant Patterns | Short-term continuation patterns following sharp moves. | Pre-ETF Approval Rally |
| Irregular | High Volatility Choppy | Frequent reversals with small price ranges relative to volatility. | LUNA/UST Collapse Impact (May 2022) |
| Irregular | Extreme Moves | Large, sudden price jumps or drops, often driven by external events. | COVID Market Crash (Mar 2020) |
| Irregular | Mixed Volatility | Fluctuating volatility with unpredictable reversals. | Binance Settlement Period (Nov 2023) |
| Irregular | Whipsaw | Rapid swings in both directions, creating erratic conditions. | China Mining Ban Impact (Jun 2021) |
3. Practical Insights for Our Stakeholders Based on TCS
The Trend Classification System (TCS) isn’t just a helpful tool for Oxido Solutions—it’s a practical system designed to provide tangible value for stakeholders across both crypto and traditional finance markets. Whether you’re an investor seeking clarity on Bitcoin’s behavior, a quant trader refining trading models, or an organization exploring market trends, TCS may deliver actionable insights tailored to your needs. Here’s how TCS can benefit key audiences:
3.1. Investors and Decision-Makers
For investors and decision-makers, navigating the complexities of financial markets requires a solid understanding of market dynamics and behavior. TCS may help this audience to make informed choices and align their strategies with broader financial objectives.
A. Market Understanding
TCS can simplify Bitcoin’s often unpredictable price movements into clear, recognizable trends and map out the trend behaviors of other assets in an organized way. This structured approach enables investors to pinpoint periods that may present investment opportunities or, conversely, pose potential risks. By demystifying market behavior, TCS empowers clients to feel more confident in their decisions.
B. Informed Decisions
Oxido Solutions’ TCS doesn’t just classify market trends; it can also be used to assess how strategies perform under various conditions. This insight provides clients with a deeper understanding of the strengths and limitations of our approach. Armed with this knowledge, investors can tailor their own investment processes to align with our strategies’ performance, helping to minimize risk and optimize returns.
3.2. Quant Traders
Quant traders, whether focused on crypto or traditional finance, face the challenge of managing increasingly complex data in fast-moving markets. The output of TCS offers these professionals information to understand market behavior, refine trading strategies, and ultimately improve outcomes.
A. Framework for Analysis
TCS acts as a comprehensive guide for identifying and categorizing market conditions. By breaking down complex price movements into actionable insights, the system may help trading teams refine their models and collaborate more effectively.
B. Enhanced Decision-Making
With TCS, traders gain access to detailed insights into how strategies perform across various market conditions. This information allows for more precise adjustments in execution plans, portfolio allocations, and risk management, leading to smarter and more accurate decisions.
C. Benchmarking and Optimization
TCS provides quant traders with a benchmark to evaluate the effectiveness of their own strategies. By comparing these strategies against the performance data of Oxido Solutions and other parties, traders can identify areas for improvement, optimize processes, and refine methodologies to achieve better results.
4. Looking Ahead
TCS is more than a technical framework—it’s a practical, adaptable system that empowers stakeholders to make informed, data-driven decisions. By turning complex market data into actionable insights, TCS reinforces Oxido Solutions’ commitment to delivering clarity, innovation, and value to its clients and partners.
In our next blog, we’ll explore the first use case of TCS. We’ll dive deeper into how our low-risk trading strategy for Bitcoin Perpetual Futures on Binance Futures performs against Bitcoin under the lens of TCS. Stay tuned for these insights!
5. DISCLAIMER
The information and opinion provided in this blog is for general purposes only and should not be considered as specific financial advice or recommendations for any individual, exchange, security, or investment product. No rights can be derived from the live data, test data, or any other data mentioned in this blog. Remember, past performance is not a guarantee of future results.
