BlockBeats News, February 6 — Crypto KOL and former FTX community partner Benson Sun posted that Bitcoin experienced an extreme decline this morning. Calculated over a 200-day lookback period, BTC’s drop reached -5.65 standard deviations (σ). In manufacturing, Six Sigma standards allow only 3.4 defects per million opportunities, defining “almost impossible” in human industrial civilization. Yesterday’s BTC volatility was only 0.35σ away from this “industrial-grade impossibility.” A -5.65σ event under a normal distribution has a theoretical probability of about one in ten billion.
Despite the fat-tail effect in financial markets, since BTC’s trading record began in July 2010, such a level of volatility has only occurred 4 times, accounting for about 0.07% of all trading days. Even during the deep bear markets of 2018 and 2022, such rapid declines did not occur within a rolling 200-day window. This poses a severe challenge to quantitative strategies. Most current quantitative models are built based on data after 2015, and historical samples exceeding 5.65σ, except for the anomaly of the “312” flash crash in 2020, all occurred before 2015, making them almost no reference cases.
CoinKarma quantitative strategy experienced unrealized losses in this round of market movement, but due to maintaining low leverage (about 1.4x) over the long term, it remains manageable, with a maximum drawdown of around 30%. While extreme market conditions are costly “tuition,” on-chain data and contract data will become important nutrients for future risk control models.
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