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.'

Applying this definition to our asset in some examples:
  • Looking at the total return of 1086.4% 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 (811.6%)
  • Looking at total return in of 6.1% in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (53.9%).

CAGR:

'Compound annual growth rate (CAGR) is a business and investing specific term for the geometric progression ratio that provides a constant rate of return over the time period. CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry.'

Applying this definition to our asset in some examples:
  • Looking at the compounded annual growth rate (CAGR) of 64.1% 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 (55.6%)
  • During the last 3 years, the compounded annual growth rate (CAGR) is 2%, which is lower, thus worse than the value of 15.5% from the benchmark.

Volatility:

'Volatility is a rate at which the price of a security increases or decreases for a given set of returns. Volatility is measured by calculating the standard deviation of the annualized returns over a given period of time. It shows the range to which the price of a security may increase or decrease. Volatility measures the risk of a security. It is used in option pricing formula to gauge the fluctuations in the returns of the underlying assets. Volatility indicates the pricing behavior of the security and helps estimate the fluctuations that may happen in a short period of time.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (67.6%) in the period of the last 5 years, the 30 days standard deviation of 57.6% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • During the last 3 years, the 30 days standard deviation is 46%, which is smaller, thus better than the value of 60.1% from the benchmark.

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.'

Using this definition on our asset we see for example:
  • The downside deviation over 5 years of Crypto & Leveraged Top 2 Strategy is 38.1%, which is smaller, thus better compared to the benchmark BTC-USD (46%) in the same period.
  • During the last 3 years, the downside deviation is 31.5%, which is smaller, thus better than the value of 41.3% 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:
  • Compared with the benchmark BTC-USD (0.79) in the period of the last 5 years, the risk / return profile (Sharpe) of 1.07 of Crypto & Leveraged Top 2 Strategy is larger, thus better.
  • Looking at Sharpe Ratio in of -0.01 in the period of the last 3 years, we see it is relatively lower, thus worse in comparison to BTC-USD (0.22).

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 excess return divided by the downside deviation of 1.62 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 (1.15)
  • Compared with BTC-USD (0.31) in the period of the last 3 years, the downside risk / excess return profile of -0.02 is smaller, thus worse.

Ulcer:

'The Ulcer Index is a technical indicator that measures downside risk, in terms of both the depth and duration of price declines. The index increases in value as the price moves farther away from a recent high and falls as the price rises to new highs. The indicator is usually calculated over a 14-day period, with the Ulcer Index showing the percentage drawdown a trader can expect from the high over that period. The greater the value of the Ulcer Index, the longer it takes for a stock to get back to the former high.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (43 ) in the period of the last 5 years, the Downside risk index of 33 of Crypto & Leveraged Top 2 Strategy is smaller, thus better.
  • During the last 3 years, the Downside risk index is 39 , which is lower, thus better than the value of 49 from the benchmark.

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:
  • Looking at the maximum reduction from previous high of -64.7 days 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 (-76.6 days)
  • Compared with BTC-USD (-76.6 days) in the period of the last 3 years, the maximum reduction from previous high of -64.7 days is higher, thus better.

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:
  • The maximum time in days below previous high water mark over 5 years of Crypto & Leveraged Top 2 Strategy is 634 days, which is larger, thus worse compared to the benchmark BTC-USD (580 days) in the same period.
  • During the last 3 years, the maximum days below previous high is 634 days, which is greater, thus worse than the value of 580 days from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (195 days) in the period of the last 5 years, the average days under water of 206 days of Crypto & Leveraged Top 2 Strategy is larger, thus worse.
  • Compared with BTC-USD (232 days) in the period of the last 3 years, the average days below previous high of 274 days is higher, thus worse.

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 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.