Survivor Bias

Survivor bias happens when a dataset only includes assets or strategies that are currently successful, ignoring those that have failed or were delisted. In the crypto space, this is a significant issue due to the high rate of token failure and exchange closures.

If a backtest only considers currently active assets, the results will be heavily skewed toward success. This leads to an overestimation of returns and an underestimation of risk.

Correcting for survivor bias requires using comprehensive datasets that include the entire history of the asset class.