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, 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 5984.3%, which is larger, thus better compared to the benchmark BTC-USD (3999%) in the same period.
  • Compared with BTC-USD (926.6%) in the period of the last 3 years, the total return, or increase in value of 1966.9% is higher, thus better.

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 127.6% 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 (110.3%)
  • Looking at annual return (CAGR) in of 174.4% in the period of the last 3 years, we see it is relatively higher, thus better in comparison to BTC-USD (117.3%).

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:
  • Looking at the volatility of 61% 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 (77.8%)
  • Looking at 30 days standard deviation in of 66.9% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (73.6%).

DownVol:

'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:
  • The downside deviation over 5 years of Crypto & Leveraged Top 2 Strategy is 39.7%, which is lower, thus better compared to the benchmark BTC-USD (51%) in the same period.
  • Compared with BTC-USD (48.6%) in the period of the last 3 years, the downside volatility of 43.5% is smaller, thus better.

Sharpe:

'The Sharpe ratio was developed by Nobel laureate William F. Sharpe, and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return allows an investor to better isolate the profits associated with risk-taking activities. One intuition of this calculation is that a portfolio engaging in 'zero risk' investments, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (1.38) in the period of the last 5 years, the risk / return profile (Sharpe) of 2.05 of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • During the last 3 years, the ratio of return and volatility (Sharpe) is 2.57, which is larger, thus better than the value of 1.56 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.'

Which means for our asset as example:
  • The ratio of annual return and downside deviation over 5 years of Crypto & Leveraged Top 2 Strategy is 3.15, which is greater, thus better compared to the benchmark BTC-USD (2.12) in the same period.
  • During the last 3 years, the ratio of annual return and downside deviation is 3.95, which is greater, thus better than the value of 2.36 from the benchmark.

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 (46 ) in the period of the last 5 years, the Ulcer Ratio of 29 of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • Compared with BTC-USD (26 ) in the period of the last 3 years, the Ulcer Ratio of 18 is lower, thus better.

MaxDD:

'Maximum drawdown measures the loss in any losing period during a fund’s investment record. It is defined as the percent retrenchment from a fund’s peak value to the fund’s valley value. The drawdown is in effect from the time the fund’s retrenchment begins until a new fund high is reached. The maximum drawdown encompasses both the period from the fund’s peak to the fund’s valley (length), and the time from the fund’s valley to a new fund high (recovery). It measures the largest percentage drawdown that has occurred in any fund’s data record.'

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 -60.6 days, which is higher, thus better compared to the benchmark BTC-USD (-83 days) in the same period.
  • During the last 3 years, the maximum DrawDown is -50.3 days, which is higher, thus better than the value of -61.8 days from the benchmark.

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). 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'

Applying this definition to our asset in some examples:
  • The maximum days under water over 5 years of Crypto & Leveraged Top 2 Strategy is 365 days, which is smaller, thus better compared to the benchmark BTC-USD (741 days) in the same period.
  • Compared with BTC-USD (336 days) in the period of the last 3 years, the maximum days under water of 233 days is lower, thus better.

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:
  • Looking at the average days under water of 95 days 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 (249 days)
  • During the last 3 years, the average time in days below previous high water mark is 57 days, which is lower, thus better than the value of 99 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.