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:

'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.'

Which means for our asset as example:
  • Looking at the total return, or performance of 1761.4% 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 (839.3%)
  • During the last 3 years, the total return is 257.4%, which is larger, thus better than the value of 91.5% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • Looking at the annual return (CAGR) of 79.7% 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 (56.7%)
  • Looking at compounded annual growth rate (CAGR) in of 53% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (24.2%).

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.'

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 volatility of 57% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • Looking at historical 30 days volatility in of 55% in the period of the last 3 years, we see it is relatively smaller, thus better in comparison to BTC-USD (64.9%).

DownVol:

'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.'

Which means for our asset as example:
  • Looking at the downside deviation of 37.2% in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively smaller, thus better in comparison to the benchmark BTC-USD (46%)
  • Looking at downside volatility in of 35.1% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (44.2%).

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:
  • Looking at the Sharpe Ratio of 1.36 in the last 5 years of Crypto & Leveraged Top 2 Strategy, we see it is relatively larger, thus better in comparison to the benchmark BTC-USD (0.79)
  • Compared with BTC-USD (0.33) in the period of the last 3 years, the Sharpe Ratio of 0.92 is greater, thus better.

Sortino:

'The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. The ratio was named after Frank A. Sortino.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (1.18) in the period of the last 5 years, the downside risk / excess return profile of 2.07 of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • Compared with BTC-USD (0.49) in the period of the last 3 years, the downside risk / excess return profile of 1.44 is larger, thus better.

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:
  • Compared with the benchmark BTC-USD (42 ) in the period of the last 5 years, the Ulcer Index of 32 of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • During the last 3 years, the Downside risk index is 38 , which is lower, thus better than the value of 50 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.'

Applying this definition to our asset in some examples:
  • 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 higher, thus better.
  • Looking at maximum DrawDown in of -64.8 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to BTC-USD (-76.6 days).

MaxDuration:

'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) in days.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (518 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 518 days of Crypto & Leveraged Top 2 Strategy is larger, thus worse.
  • Compared with BTC-USD (518 days) in the period of the last 3 years, the maximum days under water of 518 days is larger, thus worse.

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 time in days below previous high water mark over 5 years of Crypto & Leveraged Top 2 Strategy is 154 days, which is lower, thus better compared to the benchmark BTC-USD (170 days) in the same period.
  • During the last 3 years, the average days below previous high is 195 days, which is smaller, thus better than the value of 197 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.