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.

'Total return is the amount of value an investor earns from a security over a specific period, typically one year, when all distributions are reinvested. Total return is expressed as a percentage of the amount invested. For example, a total return of 20% means the security increased by 20% of its original value due to a price increase, distribution of dividends (if a stock), coupons (if a bond) or capital gains (if a fund). Total return is a strong measure of an investment’s overall performance.'

Using this definition on our asset we see for example:- The total return, or increase in value over 5 years of Crypto & Leveraged Top 2 Strategy is 1034.7%, which is greater, thus better compared to the benchmark BTC-USD (769.4%) in the same period.
- Looking at total return, or performance in of -20.7% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (13.3%).

'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:- Compared with the benchmark BTC-USD (54.2%) in the period of the last 5 years, the compounded annual growth rate (CAGR) of 62.7% of Crypto & Leveraged Top 2 Strategy is larger, thus better.
- During the last 3 years, the compounded annual growth rate (CAGR) is -7.5%, which is smaller, thus worse than the value of 4.3% from the benchmark.

'In finance, volatility (symbol σ) is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Commonly, the higher the volatility, the riskier the security.'

Using this definition on our asset we see for example:- The volatility over 5 years of Crypto & Leveraged Top 2 Strategy is 55.2%, which is lower, thus better compared to the benchmark BTC-USD (64.4%) in the same period.
- During the last 3 years, the historical 30 days volatility is 42.4%, which is smaller, thus better than the value of 56% from the benchmark.

'The downside volatility is similar to the volatility, or standard deviation, but only takes losing/negative periods into account.'

Which means for our asset as example:- Compared with the benchmark BTC-USD (43.8%) in the period of the last 5 years, the downside risk of 36.3% of Crypto & Leveraged Top 2 Strategy is smaller, thus better.
- Looking at downside deviation in of 28.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (38.4%).

'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:- The Sharpe Ratio over 5 years of Crypto & Leveraged Top 2 Strategy is 1.09, which is greater, thus better compared to the benchmark BTC-USD (0.8) in the same period.
- Looking at risk / return profile (Sharpe) in of -0.24 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (0.03).

'The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Though both ratios measure an investment's risk-adjusted return, they do so in significantly different ways that will frequently lead to differing conclusions as to the true nature of the investment's return-generating efficiency. The Sortino ratio is used as a way to compare the risk-adjusted performance of programs with differing risk and return profiles. In general, risk-adjusted returns seek to normalize the risk across programs and then see which has the higher return unit per risk.'

Applying this definition to our asset in some examples:- The downside risk / excess return profile over 5 years of Crypto & Leveraged Top 2 Strategy is 1.66, which is higher, thus better compared to the benchmark BTC-USD (1.18) in the same period.
- Compared with BTC-USD (0.05) in the period of the last 3 years, the excess return divided by the downside deviation of -0.34 is smaller, thus worse.

'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.'

Which means for our asset as example:- Looking at the Ulcer Index of 32 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 (40 )
- Compared with BTC-USD (49 ) in the period of the last 3 years, the Downside risk index of 40 is lower, thus better.

'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.'

Applying this definition to our asset in some examples:- The maximum drop from peak to valley over 5 years of Crypto & Leveraged Top 2 Strategy is -64.7 days, which is higher, 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 drop from peak to valley of -64.7 days is larger, thus better.

'The Drawdown Duration is the length of any peak to peak period, or the time between new equity highs. The Max Drawdown Duration is the worst (the maximum/longest) amount of time an investment has seen between peaks (equity highs). Many assume Max DD Duration is the length of time between new highs during which the Max DD (magnitude) occurred. But that isn’t always the case. The Max DD duration is the longest time between peaks, period. So it could be the time when the program also had its biggest peak to valley loss (and usually is, because the program needs a long time to recover from the largest loss), but it doesn’t have to be'

Which means for our asset as example:- Compared with the benchmark BTC-USD (580 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 755 days of Crypto & Leveraged Top 2 Strategy is greater, thus worse.
- Looking at maximum time in days below previous high water mark in of 755 days in the period of the last 3 years, we see it is relatively greater, thus worse in comparison to BTC-USD (580 days).

'The Average 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. 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 (168 days) in the period of the last 5 years, the average days below previous high of 253 days of Crypto & Leveraged Top 2 Strategy is larger, thus worse.
- Compared with BTC-USD (243 days) in the period of the last 3 years, the average days under water of 378 days is greater, thus worse.

Historical returns have been extended using synthetic data.
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- 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 and do not account for slippage, fees or taxes.
- Results may be based on backtesting, which has many inherent limitations, some of which are described in our Terms of Use.