Description

This is a very aggressive strategy that invests in the top performers across a selection of crypto, equity, treasury and precious metal assets with similar volatility characteristics. These asset classes are represented by Bitcoin, Ethereum, SPXL, TMF and AGQ. Twice each month, the strategy ranks these assets using our Modified Sharpe Ratio and invests 50% of the portfolio in each of the top two performers.

Due to the nature of crypto currency and leveraged ETFs, investors should be prepared for large swings up and down.

Here are some of the possible market scenarios this strategy is designed take advantage of:

  • Ethereum is performing well but Bitcoin is under-performing. The strategy can invest 50% in Ethereum and 50% in SPXL.
  • A prolonged crypto bear market. The strategy can shift to 50% in SPXL and 50% in TMF.
  • Cryptos are outperforming other asset classes. The strategy could invest fully in crypto assets by allocating 50% to Bitcoin and 50% to Ethereum.

Twice Monthly Rebalancing

The strategy rebalances on the 1st and 16th of each month which provides a balance between a very active daily or weekly rebalancing, that can cause whipsaws, and a monthly rebalancing that may be too slow considering how fast the crypto markets move. The twice-monthly frequency is simple to execute, avoids whipsaws but can still react to shifting market trends.

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Statistics (YTD)

What do these metrics mean? [Read More] [Hide]

TotalReturn:

'Total return, when measuring performance, is the actual rate of return of an investment or a pool of investments over a given evaluation period. Total return includes interest, capital gains, dividends and distributions realized over a given period of time. Total return accounts for two categories of return: income including interest paid by fixed-income investments, distributions or dividends and capital appreciation, representing the change in the market price of an asset.'

Which means for our asset as example:
  • The total return over 5 years of Crypto & Leveraged Top 2 Strategy is 1481.8%, which is higher, thus better compared to the benchmark BTC-USD (1139.6%) in the same period.
  • Looking at total return in of 25.3% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (26.1%).

CAGR:

'The compound annual growth rate isn't a true return rate, but rather a representational figure. It is essentially a number that describes the rate at which an investment would have grown if it had grown the same rate every year and the profits were reinvested at the end of each year. In reality, this sort of performance is unlikely. However, CAGR can be used to smooth returns so that they may be more easily understood when compared to alternative investments.'

Which means for our asset as example:
  • Looking at the annual return (CAGR) of 73.8% in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively higher, thus better in comparison to the benchmark BTC-USD (65.5%)
  • Compared with BTC-USD (8%) in the period of the last 3 years, the annual performance (CAGR) of 7.8% is lower, thus worse.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (68.2%) in the period of the last 5 years, the 30 days standard deviation of 58.3% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • During the last 3 years, the historical 30 days volatility is 47.2%, which is smaller, thus better than the value of 60.9% from the benchmark.

DownVol:

'Downside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk in our definition is the semi-deviation, that is the standard deviation of all negative returns.'

Using this definition on our asset we see for example:
  • The downside deviation over 5 years of Crypto & Leveraged Top 2 Strategy is 38.2%, which is smaller, thus better compared to the benchmark BTC-USD (46%) in the same period.
  • Compared with BTC-USD (42.4%) in the period of the last 3 years, the downside deviation of 31.9% is smaller, thus better.

Sharpe:

'The Sharpe ratio is the measure of risk-adjusted return of a financial portfolio. Sharpe ratio is a measure of excess portfolio return over the risk-free rate relative to its standard deviation. Normally, the 90-day Treasury bill rate is taken as the proxy for risk-free rate. A portfolio with a higher Sharpe ratio is considered superior relative to its peers. The measure was named after William F Sharpe, a Nobel laureate and professor of finance, emeritus at Stanford University.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (0.92) in the period of the last 5 years, the Sharpe Ratio of 1.22 of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • Looking at ratio of return and volatility (Sharpe) in of 0.11 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (0.09).

Sortino:

'The Sortino ratio, a variation of the Sharpe ratio only factors in the downside, or negative volatility, rather than the total volatility used in calculating the Sharpe ratio. The theory behind the Sortino variation is that upside volatility is a plus for the investment, and it, therefore, should not be included in the risk calculation. Therefore, the Sortino ratio takes upside volatility out of the equation and uses only the downside standard deviation in its calculation instead of the total standard deviation that is used in calculating the Sharpe ratio.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (1.37) in the period of the last 5 years, the ratio of annual return and downside deviation of 1.87 of Crypto & Leveraged Top 2 Strategy is higher, thus better.
  • Looking at ratio of annual return and downside deviation in of 0.17 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (0.13).

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:
  • The Ulcer Ratio over 5 years of Crypto & Leveraged Top 2 Strategy is 33 , which is lower, thus better compared to the benchmark BTC-USD (43 ) in the same period.
  • Compared with BTC-USD (50 ) in the period of the last 3 years, the Ulcer Ratio of 39 is smaller, thus better.

MaxDD:

'Maximum drawdown is defined as the peak-to-trough decline of an investment during a specific period. It is usually quoted as a percentage of the peak value. The maximum drawdown can be calculated based on absolute returns, in order to identify strategies that suffer less during market downturns, such as low-volatility strategies. However, the maximum drawdown can also be calculated based on returns relative to a benchmark index, for identifying strategies that show steady outperformance over time.'

Using this definition on our asset we see for example:
  • The maximum DrawDown over 5 years of Crypto & Leveraged Top 2 Strategy is -64.7 days, which is larger, thus better compared to the benchmark BTC-USD (-76.6 days) in the same period.
  • Compared with BTC-USD (-76.6 days) in the period of the last 3 years, the maximum reduction from previous high of -64.7 days is larger, thus better.

MaxDuration:

'The Maximum Drawdown Duration is an extension of the Maximum Drawdown. However, this metric does not explain the drawdown in dollars or percentages, rather in days, weeks, or months. It is the length of time the account was in the Max Drawdown. A Max Drawdown measures a retrenchment from when an equity curve reaches a new high. It’s the maximum an account lost during that retrenchment. This method is applied because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the bottom of the largest trough is recorded.'

Applying this definition to our asset in some examples:
  • Looking at the maximum days below previous high of 618 days in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively greater, thus worse in comparison to the benchmark BTC-USD (580 days)
  • During the last 3 years, the maximum time in days below previous high water mark is 618 days, which is larger, thus worse than the value of 580 days from the benchmark.

AveDuration:

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Avg Drawdown Duration is the average amount of time an investment has seen between peaks (equity highs), or in other terms the average of time under water of all drawdowns. So in contrast to the Maximum duration it does not measure only one drawdown event but calculates the average of all.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (196 days) in the period of the last 5 years, the average days under water of 200 days of Crypto & Leveraged Top 2 Strategy is higher, thus worse.
  • Compared with BTC-USD (236 days) in the period of the last 3 years, the average days below previous high of 264 days is larger, thus worse.

Performance (YTD)

Historical returns have been extended using synthetic data.

Allocations ()

Allocations

Returns (%)

  • Note that yearly returns do not equal the sum of monthly returns due to compounding.
  • Performance results of Crypto & Leveraged Top 2 Strategy are hypothetical, do not account for slippage, fees or taxes, and are based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.