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.

Statistics (YTD)

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

TotalReturn:

'The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. This contrasts with the price return, which takes into account only the capital gain on an investment.'

Applying this definition to our asset in some examples:
  • Looking at the total return, or performance of 969.2% in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively greater, thus better in comparison to the benchmark BTC-USD (274%)
  • Compared with BTC-USD (193.3%) in the period of the last 3 years, the total return of 497.2% is greater, thus better.

CAGR:

'The compound annual growth rate (CAGR) is a useful measure of growth over multiple time periods. It can be thought of as the growth rate that gets you from the initial investment value to the ending investment value if you assume that the investment has been compounding over the time period.'

Using this definition on our asset we see for example:
  • The annual return (CAGR) over 5 years of Crypto & Leveraged Top 2 Strategy is 60.7%, which is higher, thus better compared to the benchmark BTC-USD (30.2%) in the same period.
  • During the last 3 years, the compounded annual growth rate (CAGR) is 81.6%, which is higher, thus better than the value of 43.2% from the benchmark.

Volatility:

'Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. In the securities markets, volatility is often associated with big swings in either direction. For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a 'volatile' market.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (69.8%) in the period of the last 5 years, the 30 days standard deviation of 56.8% of Crypto & Leveraged Top 2 Strategy is smaller, thus better.
  • Compared with BTC-USD (66.5%) in the period of the last 3 years, the 30 days standard deviation of 60.8% is lower, thus better.

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.'

Applying this definition to our asset in some examples:
  • The downside risk over 5 years of Crypto & Leveraged Top 2 Strategy is 37.4%, which is lower, thus better compared to the benchmark BTC-USD (48%) in the same period.
  • Looking at downside deviation in of 38.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (44.7%).

Sharpe:

'The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) is a way to examine the performance of an investment by adjusting for its risk. The ratio measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk, named after William F. Sharpe.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (0.4) in the period of the last 5 years, the Sharpe Ratio of 1.03 of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 1.3, which is greater, thus better than the value of 0.61 from the benchmark.

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:
  • Looking at the downside risk / excess return profile of 1.56 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 (0.58)
  • Looking at downside risk / excess return profile in of 2.03 in the period of the last 3 years, we see it is relatively greater, thus better in comparison to BTC-USD (0.91).

Ulcer:

'The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann in their 1989 book The Investors Guide to Fidelity Funds. It's designed as a measure of volatility, but only volatility in the downward direction, i.e. the amount of drawdown or retracement occurring over a period. Other volatility measures like standard deviation treat up and down movement equally, but a trader doesn't mind upward movement, it's the downside that causes stress and stomach ulcers that the index's name suggests.'

Using this definition on our asset we see for example:
  • Looking at the Ulcer Ratio of 29 in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively lower, thus better in comparison to the benchmark BTC-USD (41 )
  • During the last 3 years, the Ulcer Index is 33 , which is lower, thus better than the value of 44 from the benchmark.

MaxDD:

'A maximum drawdown is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as 'Return over Maximum Drawdown' and the Calmar Ratio. Maximum Drawdown is expressed in percentage terms.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (-76.6 days) in the period of the last 5 years, the maximum DrawDown of -64.8 days of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • During the last 3 years, the maximum drop from peak to valley is -64.8 days, which is higher, thus better than the value of -76.6 days from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The maximum days below previous high over 5 years of Crypto & Leveraged Top 2 Strategy is 390 days, which is higher, thus worse compared to the benchmark BTC-USD (390 days) in the same period.
  • Looking at maximum time in days below previous high water mark in of 390 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to BTC-USD (390 days).

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:
  • The average days below previous high over 5 years of Crypto & Leveraged Top 2 Strategy is 120 days, which is lower, thus better compared to the benchmark BTC-USD (137 days) in the same period.
  • During the last 3 years, the average time in days below previous high water mark is 120 days, which is lower, thus better than the value of 125 days from the benchmark.

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.