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:
  • The total return, or increase in value over 5 years of Crypto & Leveraged Top 2 Strategy is 5984.3%, which is greater, thus better compared to the benchmark BTC-USD (3999%) in the same period.
  • Looking at total return in of 1966.9% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (926.6%).

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:
  • Compared with the benchmark BTC-USD (110.3%) in the period of the last 5 years, the annual performance (CAGR) of 127.6% of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • Looking at annual performance (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:

'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:
  • Compared with the benchmark BTC-USD (77.8%) in the period of the last 5 years, the 30 days standard deviation of 61% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • Compared with BTC-USD (73.6%) in the period of the last 3 years, the historical 30 days volatility of 66.9% 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.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (51%) in the period of the last 5 years, the downside deviation of 39.7% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • During the last 3 years, the downside deviation is 43.5%, which is lower, thus better than the value of 48.6% from the benchmark.

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.'

Which means for our asset as example:
  • The Sharpe Ratio over 5 years of Crypto & Leveraged Top 2 Strategy is 2.05, which is higher, thus better compared to the benchmark BTC-USD (1.38) in the same period.
  • Looking at ratio of return and volatility (Sharpe) in of 2.57 in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (1.56).

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.'

Applying this definition to our asset in some examples:
  • Looking at the excess return divided by the downside deviation of 3.15 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 (2.12)
  • During the last 3 years, the ratio of annual return and downside deviation is 3.95, which is larger, 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:
  • Looking at the Downside risk index of 29 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 )
  • Compared with BTC-USD (26 ) in the period of the last 3 years, the Downside risk index of 18 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (-83 days) in the period of the last 5 years, the maximum DrawDown of -60.6 days of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • Looking at maximum drop from peak to valley in of -50.3 days in the period of the last 3 years, we see it is relatively higher, thus better in comparison to BTC-USD (-61.8 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). 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:
  • Compared with the benchmark BTC-USD (741 days) in the period of the last 5 years, the maximum time in days below previous high water mark of 365 days of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • During the last 3 years, the maximum days under water is 233 days, which is lower, thus better than the value of 336 days from the benchmark.

AveDuration:

'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.'

Which means for our asset as example:
  • The average time in days below previous high water mark over 5 years of Crypto & Leveraged Top 2 Strategy is 95 days, which is smaller, thus better compared to the benchmark BTC-USD (249 days) in the same period.
  • Looking at average time in days below previous high water mark in of 57 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (99 days).

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.