Gate Research Institute: BTC and ETH are oscillating at high levels, while the ADA Bollinger strategy maintains stable returns.

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Summary

• BTC and ETH are both in a high-level oscillation range, with price structures and volatility showing divergence, and overall short-term momentum is relatively weak.
• The long-short ratio of BTC continues to decline, while ETH's long-short ratio declines in sync during the upward process. Market sentiment has not effectively followed, showing signs of divergence in structure.
• On the contract level, the holding amount of BTC has significantly fallen from its peak, while ETH remains relatively stable, indicating that leveraged funds have not fully exited.
• On September 22, the amount of long positions liquidated surged to over 1.6 billion USD, highlighting the pressure on the market at high levels, with a cascading effect of stop-losses by bulls exacerbating the weakening sentiment.
• In terms of quantitative strategies, the reversal strategy based on the Bollinger Bands has performed impressively with the ADA cryptocurrency, achieving an annualized return of over 60%, demonstrating strong short-term trading potential.

Market Overview

In order to systematically present the funding behavior and changes in trading structure of the current cryptocurrency market, this report examines five key dimensions: the price volatility of Bitcoin and Ethereum, the long-short ratio (LSR), contract open interest, funding rates, and market liquidation data. These five indicators cover price trends, funding sentiment, and risk conditions, and can comprehensively reflect the current market's trading intensity and structural characteristics. The following will sequentially analyze the latest changes in each indicator since September 9:

1. Analysis of Price Volatility of Bitcoin and Ethereum

According to CoinGecko data, from September 9 to 22, the overall cryptocurrency market continued to experience a high-level consolidation pattern. After BTC and ETH reached new highs during the previous phase, the market entered a wait-and-see consolidation phase, with trading momentum significantly converging and market structure showing divergence.

BTC has been continuously blocked above 119,000 USD since it reached 124,400 USD in mid-August, making multiple attempts to break through but failing. It eventually started to decline in mid-September, with the trend weakening and losing key support zones. ETH, on the other hand, quickly retraced after breaking through 4,700 USD, and accelerated its decline on September 21, reaching a low of 4,067 USD, indicating that a short-term weak structure has formed.

On a macro level, there are also mixed signals with both bullish and bearish trends. The Solana ecosystem has gained support from multiple listed companies, and the TVL of liquidity staking protocols like Jito is climbing. The 30-day trading volume of the Avalanche RWA sector has surged by 130%, indicating a rapid recovery in ecosystem activity. Perp DEX trading volume is frequently setting new records, with protocols like Aster showing outstanding performance.

In summary, BTC and ETH both weakened synchronously after mid-September, but ETH has stronger institutional buying support and is bolstered by ETF discussions. If it can regain the $4,300 level and increase trading volume, it is expected to be the first to break free from weakness. It is recommended to focus on the short-term dynamics of ETF net inflows, whether ETH's technical aspect can stabilize and stop falling, and whether the market transitions from high-level consolidation to structural rotation.

Figure 1: BTC continues to face resistance above $119,000, with multiple attempts to break through failing; ETH, on the other hand, quickly retraced after breaking $4,700, hitting a low of $4,067.

The volatility of BTC remains at a generally low to moderate level, with only a few trading days showing significant increases, indicating a steady pace of main operations and clear trend expectations, while the market's willingness to chase highs and cut losses is not strong. In contrast, the volatility of ETH is significantly more active, with multiple spikes occurring in the past two weeks, reflecting intense short-term sentiment fluctuations and more sensitivity to fund inflows and outflows, especially around key price levels.

Although the current volatility has not fully amplified, the frequent warming of ETH is worth paying attention to. If the subsequent increase in volume is accompanied by intensified volatility, it may indicate that a new round of market trends is brewing. It is recommended to pay attention to the correlation between ETH volatility and trading volume.

Figure 2: BTC's volatility rhythm is stable, with only a few high volatility days; ETH, on the other hand, frequently spikes, and short-term trading sentiment is significantly heating up.

The cryptocurrency market has been in a consolidation phase at a high level for the past two weeks. BTC shows structural stability but lacks momentum. Although ETH has a weak short-term technical structure, it still has the potential to rebound first due to the influx of ETF funds and rising volatility. It is recommended to closely monitor the fund movements of ETH and the performance of key support levels in the short term to determine whether a structural rotation is about to unfold.

2. Analysis of Long-Short Ratio (LSR) of Bitcoin and Ethereum Trading Volume

Long/Short Taker Size Ratio (LSR) is an indicator that measures the ratio of active long to short funds in the market. An LSR greater than 1 indicates a bullish market, with long positions dominating, while an LSR less than 1 indicates a bearish market. This indicator reflects the strength of trading sentiment and changes in momentum.

According to Coinglass data, although BTC has maintained a high range for consolidation over the past two weeks, LSR has overall oscillated downward, having fallen below 0.9, indicating a significant reduction in the market's willingness to chase long positions. Fund operations have become more conservative; although the structure has not broken down, the support from sentiment is gradually weakening, and insufficient incremental buying has led to a lack of continuity in the trend. [5]

ETH is facing a similar situation. Although the price surged past the $4,300 mark in early September, the LSR has fallen back from its high, even dropping below BTC, and has maintained around 0.9 for several days. This indicates that there has not been a corresponding emotional support during the rise, but rather a divergence pattern where the price increase is not strongly supported by sentiment.

Overall, BTC and ETH are in a high-level consolidation phase, with a continued weak long-short ratio and weakened short-term momentum. If they cannot quickly rebound above 1, it may suppress the strength of the rebound; conversely, if LSR reverses and returns to a strong range, it could be an important signal for market recovery.

Figure 3: BTC price maintains a high consolidation range, but the long-short ratio continues to decline, indicating weak bullish sentiment.

Figure 4: The long-short ratio of ETH is more significantly declining, and the sentiment has not been able to strengthen synchronously during the price increase, indicating a divergence in the structure.

3. Contract Position Amount Analysis

According to Coinglass data, the overall position amount of BTC and ETH contracts remains at a relatively high range, with leveraged funds not significantly withdrawn, and the market's speculative atmosphere continues. 【6】 The position amount of BTC contracts rose rapidly to 86 billion USD in early September but has since significantly retraced from its high, indicating that bullish leveraged funds are reducing positions for risk aversion, and the market's short-term sentiment has become more conservative. In contrast, the position amount of ETH contracts shows a more stable trend, with fluctuations but an overall limited decline, reflecting that leveraged funds' allocation to ETH positions is relatively stable, with a slower rate of exit.

Overall, the current leveraged long positions in BTC are actively cooling down, while ETH shows stronger resilience in holdings. However, considering that both are in a phase of high prices and leverage, if market volatility intensifies further, it is necessary to be cautious of the chain reaction risks under high leverage structures, such as concentrated liquidations or irrational pullbacks.

Figure 5: The BTC contract position amount has quickly fallen from its high, while the ETH position remains relatively stable, and leveraged funds have not completely exited the market.

4. Funding Rate

The funding rates for BTC and ETH mostly remain above zero, only briefly turning negative during certain periods, indicating that the overall market maintains a moderately bullish structure. This means that the long positions are relatively active, leverage funds have not withdrawn, but the sentiment is also not extremely optimistic.

ETH has shown several notable turnarounds to the negative during the pullback phase, especially close to mid-month and the end of the month, reflecting a temporary shift of short-term funds towards a conservative stance, but most of it quickly recovered, not triggering a systemic decline. The funding rate of BTC, on the other hand, has been more stable, consistently remaining near positive territory with smaller fluctuations, reflecting the steady sentiment of institutions and medium to long-term funds.

Overall, the current market funding rate is slightly positive, indicating that bullish sentiment is still present, but there is a lack of strong amplification momentum. If the funding rate continues to rise in the future and is accompanied by an increase in trading volume, it is likely to become an important signal for further market push; conversely, if the funding rate turns negative consecutively, one should be cautious of short-term weakening risks.

Figure 6: The funding rates for BTC and ETH mostly remain positive, indicating a bullish market, but the bullish momentum still appears moderate.

5. Cryptocurrency Contract Liquidation Chart

According to Coinglass data, although the cryptocurrency market remains in a high-level consolidation overall, it is still accompanied by periodic market fluctuations, leading to continuous liquidation events in the futures market, indicating that the tension between bulls and bears continues to be released.

The amount of long and short liquidations is relatively mild, presenting a healthy structure of rotation between longs and shorts, with tension interwoven and released. For example, on September 12 and 13, the amount of short liquidations significantly increased, reflecting that short positions exited with stop-losses during the market's short-term rebound; while on September 15 and 19, the focus was mainly on long liquidations, corresponding to a phase of market pressure and pullback, where long funds encountered reverse liquidation.

The largest scale of liquidations occurred on September 22, with the amount of long position liquidations surging to over $1.6 billion, far exceeding the previous average level. This indicates that the market experienced concentrated liquidations after key support was broken, with long position funds rushing to exit, resulting in a more cautious short-term sentiment.

Overall, the current contract liquidation structure is still characterized by a rotational release, without forming a systemic chain reaction. However, the liquidation of large long positions shows that high-leverage funds are under pressure. If the subsequent market does not recover quickly, it is necessary to be cautious of further weakening market confidence.

Figure 7: On September 22, the amount of long position liquidations surged to over 1.6 billion USD, indicating that the market is under pressure at high levels, and the sentiment is worsening as longs are forced to liquidate.

In the context of the current high-level consolidation and converging volatility, the overall funding behavior in the cryptocurrency market remains neutral to bullish. However, multiple contract indicators show a weakening desire to chase long positions and a trend of slowing short-term momentum. The LSR and long-short ratio continue to decline, the funding rate remains positive but has not expanded, and the liquidation structure has shifted from long-short rotation to concentrated long position liquidations, indicating that while the market structure has not collapsed, there are signs of loosening confidence in leverage.

In the face of the marginal convergence of leveraged funds and the divergence of long and short sentiments, investors need to closely monitor changes in key price ranges and volatility indicators to assess whether the market trend will shift from high-level fluctuations to a trend reversal or a wave correction. Therefore, the following content will shift to the empirical evaluation of the "Bollinger Bands Reversal Strategy", focusing on its adaptability in identifying extreme price deviations, capturing rebound or pullback turning points under different market rhythms, and discussing the actual performance of this strategy in enhancing risk control efficiency, reducing the frequency of chasing highs and selling lows, and optimizing entry and exit judgments in a volatile market.

Quantitative Analysis - Bollinger Bands Reversal Strategy

（Disclaimer: All predictions in this article are based on historical data and market trends, and are for reference only. They should not be considered as investment advice or guarantees of future market movements. Investors should fully consider the risks and make cautious decisions when engaging in related investments.)

1. Strategy Overview

The "Bollinger Band Reversal Strategy" is a reversal strategy that combines volatility assessment with trend structure monitoring. The strategy is centered around the Bollinger Bands as the core indicator. When the price breaks below the lower band, it is seen as a signal that the market is temporarily oversold and may rebound, triggering a long position entry; when the price crosses above the upper band or reaches preset profit-taking and stop-loss thresholds, it is considered that the market phase has ended, leading to an exit operation.

In order to enhance the stability of the strategy and the basis for judgment, the system also synchronously references multiple simple and exponential moving averages (SMA/EMA) to grasp the long-term trend direction of the market, combined with a fixed ratio profit-taking and stop-loss mechanism to effectively control risk and lock in profits. The overall strategy is suitable for ranging or high-volatility environments, capturing short-term reversal opportunities, and has a certain margin for error and trading discipline.

2. Core Parameter Settings

3. Strategy Logic and Operating Mechanism

Entry Conditions

• In a no-position state, when the price falls below the lower Bollinger Band, it is considered oversold, and a long position is established.

Entry Conditions:

• Stop Loss Closure: If the price falls back to the buying price * (1 - stop_loss_percent), a forced stop loss is triggered.
• Take Profit Close: If the price rises to the buying price * (1 + take_profit_percent), trigger the take profit close.
• Bollinger Upper Band Exit: If the price breaks through the upper Bollinger Band, it indicates a return to normal market conditions in the short term, triggering a closing signal.

Practical Example Diagram

• Trade signal triggered The image below shows the ETH/USDT 1-hour candlestick chart when the strategy triggered entry on May 25, 2025. It can be seen that the price quickly rebounded after breaking below the lower Bollinger Band, accompanied by an increase in trading volume and a MACD golden cross. The strategy entered a buy position at this point, successfully capturing the short-term rebound starting point, in line with the entry logic of the Bollinger Band strategy.

Figure 8: Schematic of the actual entry position when the strategy conditions for ETH/USDT are triggered (May 25, 2025)

• Trade Actions and Results ETH reached the upper Bollinger Band on May 26, and the system executed an exit operation according to the strategy settings, successfully locking in profits from this round of short-term rebound. Although the market did experience a slight upward movement afterwards, this exit adhered to the disciplined exit logic of the Bollinger Bands, demonstrating stable risk control execution. If moving take-profit or trend-following mechanisms are integrated in the future, it may further enhance the performance of holding in strong markets.

Figure 9: ETH/USDT Strategy Exit Position Diagram (May 26, 2025)

Through the above practical example, we intuitively present the entry and exit logic of the strategy when the price reaches the boundaries of the Bollinger Bands, along with the dynamic take profit and stop loss mechanism. The strategy utilizes price breaking down below the lower Bollinger Band for low-level positioning and combines breaking above the upper Bollinger Band as an exit signal, effectively capturing short-term rebound opportunities. While controlling the risk of drawdown, it successfully locks in the main profit range. This case not only verifies the practicality and disciplined execution of the Bollinger Bands strategy but also demonstrates its stable performance and risk control ability in highly volatile markets, providing empirical support for subsequent parameter optimization and application expansion.

4. Practical Application Examples

Parameter Backtesting Settings

To find the best combination of parameters, we conduct a systematic grid search over the following range:

• bb_period: 5 to 25 (step size of 1)
• bb_dev: 1 to 5 (step size of 1)
• stop_loss_percent: 1% to 2% (step size of 0.5%)
• take_profit_percent: 10% to 16% (step of 5%)

Taking the top ten projects by cryptocurrency market capitalization (excluding stablecoins) as an example, this article backtested the 1-hour candlestick data from January to September 2025, testing a total of 630 parameter combinations and selecting the five groups with the best annualized return performance. Evaluation criteria include annualized return, Sharpe ratio, maximum drawdown, and ROMAD (return to maximum drawdown ratio), to comprehensively assess the strategy's stability and risk-adjusted performance in different market environments.

Figure 10: Performance Comparison Table of Five Optimal Strategies

Strategy Logic Description

When the program detects that the price falls below the lower Bollinger Band, it is considered a short-term oversold signal, triggering an immediate buy operation. This structure aims to capture rebound opportunities after the price deviates from the mean, and combines the upper Bollinger Band as a dynamic take-profit reference to enhance profit-locking effects. If the price rebounds to the upper band, or reaches a preset stop-loss or take-profit ratio, the system will automatically execute an exit action to balance risk and reward.

Taking ADA as an example, the settings used in this strategy are as follows:

• bb_period= 17 (Bollinger Bands calculation period, controls bandwidth response speed)
• bb_dev = 3 (Bollinger Bands standard deviation multiple, determines the sensitivity of the upper and lower bands)
• stop_loss_percent = 1%
• take_profit_percent = 15%

This logic combines statistical reversal signals with a fixed ratio risk control mechanism, suitable for application in market conditions with clear oscillation or pullback structures.

Performance and Results Analysis

The backtesting period covers January to September 2025, and the chart displays the trading performance of multiple cryptocurrencies based on the Bollinger Bands strategy, compared with the spot buy-and-hold strategy for BTC. Overall, the performance of the strategy portfolio varies across different cryptocurrencies, but some assets show significant excess returns.

Among them, the ADA strategy performed the best, significantly breaking out of the consolidation range since May, with a cumulative return rate exceeding 35% by September, making it the best-performing strategy among all cryptocurrencies; the DOGE strategy also maintained a stable upward trend, with final returns exceeding 15%. In contrast, the ETH and TRX strategies experienced noticeable pullbacks mid-year, especially TRX, which once fell nearly -30%, reflecting the volatility risk of the strategies in specific fluctuating market conditions.

It is worth noting that although the buy-and-hold strategy for BTC saw a slight rebound after July, the overall returns are still lower than most Bollinger strategy portfolios. Strategies like SOL, APT, and SUI maintained a relatively stable performance, effectively avoiding significant losses in a volatile market, demonstrating strong capital management capabilities.

Overall, this strategy demonstrates the potential for greater profitability than a buy-and-hold strategy across most cryptocurrencies, and possesses the ability to adjust flexibly in both trending and sideways markets. In the future, further mechanisms such as incorporating volatility screening conditions, volume filtering, and multi-timeframe combinations can be introduced to enhance the strategy's adaptability in different market environments, as well as extend it to multi-cryptocurrency cross-deployment to increase its practical application value.

Figure 11: Comparison of the cumulative return rates over the past year between the ten optimal parameter strategies and the holding strategy.

5. Trading Strategy Summary

This study verifies that the Bollinger Bands reversal strategy has good adaptability and practical potential in volatile markets. By capturing reversal opportunities after price deviations from the mean, the strategy achieves performance that surpasses Buy and Hold for most cryptocurrencies, particularly showing significant cumulative returns on ADA and DOGE, with good drawdown control.

Overall, the Bollinger Bands strategy demonstrates strong adaptability in volatile markets, particularly excelling in structures where the price quickly returns after a brief deviation from the mean. The performance of coins such as ADA and DOGE is particularly notable, with the strategy not only achieving cumulative returns exceeding 15%-30%, but also maintaining relatively good drawdown control, indicating that this strategy possesses a certain level of stability and practicality in swing recovery markets.

Nevertheless, the backtest results also show that ETH and TRX, among other cryptocurrencies, experienced significant pullbacks during certain phases, reflecting that the Bollinger Bands strategy may face the risk of "premature reversal" signal failure in strong trending markets, which requires a more detailed trend identification mechanism to filter.

Based on the current backtesting results, the Bollinger Bands reversal strategy has achieved a preliminary balance between returns and risk control, demonstrating good market adaptability. If the parameter structure continues to be optimized, and multi-period, cross-currency allocation and risk control mechanisms are introduced, it is expected to expand its application range in more market environments, becoming one of the stable and practical quantitative strategy tools.

Summary

From September 9 to 22, 2025, the cryptocurrency market continued to experience a high-level oscillation structure, but the behavior of funds and trading sentiment showed marginal changes. Although the technical aspects of BTC and ETH did not break down, volatility and trading momentum continued to converge, indicating a slowdown in market rhythm. LSR, long-short ratios, and funding rates mostly maintained a bullish bias, but lacked amplifying momentum, reflecting a cautious confidence among bulls. Despite ETH being supported by ETF themes, sentiment and structure also showed divergence.

On the contract level, BTC positions have retreated from their highs, while ETH remains relatively stable but without significant increases; the funding rates are mostly positive but with a mild structure. The concentrated liquidation of long positions on September 22 highlights the fragility of leverage, and market defensive sentiment is rising. Overall, we are currently in the final stage of high-level volatility, with structural rotation and capital cleansing coexisting. The market still has continuity, but the willingness to chase long positions has weakened. If there is no new capital to push it up, attention should be paid to the risk of a downward breakout.

In this context, strategies built on the Bollinger Bands deviation reversal logic demonstrate good practical potential. In the backtesting results, ADA's cumulative return exceeded 35%, and the overall strategy shows better risk control and entry-exit balance in a volatile market. It should be noted that the parameter trigger frequency is relatively low, and ETH and TRX are susceptible to premature reversals in trending markets. In the future, combining dynamic bandwidth, volatility screening, and volume assistance mechanisms will help improve signal quality and strategy adaptability, enhancing its deployment value in the actual market.
Reference Material:

1. CoinGecko, https://www.coingecko.com/
2. Gate, https://www.gate.com/trade/BTC_USDT
3. Gate, https://www.gate.com/trade/ETH_USDT
4. Sosovalue, https://sosovalue.com/assets/etf/us-btc-spot?from=moved
5. Coinglass, https://www.coinglass.com/LongShortRatio
6. Coinglass, https://www.coinglass.com/BitcoinOpenInterest?utm_source=chatgpt.com
7. Gate, https://www.gate.com/futures_market_info/BTC_USD/capital_rate_history
8. Gate, https://www.gate.com/futures/introduction/funding-rate-history?from=USDT-M&contract=ETH_USDT
9. Coinglass, https://www.coinglass.com/pro/futures/Liquidations

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