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.'

Using this definition on our asset we see for example:
  • Compared with the benchmark BTC-USD (365.3%) in the period of the last 5 years, the total return of 1299.8% of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • During the last 3 years, the total return, or increase in value is 466.2%, which is higher, thus better than the value of 135.4% from the benchmark.

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:
  • Looking at the compounded annual growth rate (CAGR) of 69.7% 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 (36.1%)
  • Looking at annual return (CAGR) in of 78.2% in the period of the last 3 years, we see it is relatively larger, thus better in comparison to BTC-USD (33%).

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 (75.9%) in the period of the last 5 years, the 30 days standard deviation of 57.7% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • Compared with BTC-USD (72.1%) in the period of the last 3 years, the historical 30 days volatility of 61.8% is smaller, thus better.

DownVol:

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

Applying this definition to our asset in some examples:
  • The downside volatility over 5 years of Crypto & Leveraged Top 2 Strategy is 38.6%, which is smaller, thus better compared to the benchmark BTC-USD (51.8%) in the same period.
  • During the last 3 years, the downside deviation is 41.3%, which is lower, thus better than the value of 50.4% 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.'

Using this definition on our asset we see for example:
  • Looking at the ratio of return and volatility (Sharpe) of 1.16 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 (0.44)
  • Compared with BTC-USD (0.42) in the period of the last 3 years, the Sharpe Ratio of 1.22 is larger, 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.'

Applying this definition to our asset in some examples:
  • Compared with the benchmark BTC-USD (0.65) in the period of the last 5 years, the excess return divided by the downside deviation of 1.74 of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • During the last 3 years, the downside risk / excess return profile is 1.84, which is higher, thus better than the value of 0.61 from the benchmark.

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.'

Applying this definition to our asset in some examples:
  • The Ulcer Ratio over 5 years of Crypto & Leveraged Top 2 Strategy is 31 , which is smaller, thus better compared to the benchmark BTC-USD (51 ) in the same period.
  • Looking at Downside risk index in of 21 in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (33 ).

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.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (-83 days) in the period of the last 5 years, the maximum drop from peak to valley of -56.3 days of Crypto & Leveraged Top 2 Strategy is greater, thus better.
  • Looking at maximum drop from peak to valley in of -56.1 days in the period of the last 3 years, we see it is relatively greater, thus better in comparison to BTC-USD (-72.5 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.'

Which means for our asset as example:
  • Compared with the benchmark BTC-USD (741 days) in the period of the last 5 years, the maximum days under water of 359 days of Crypto & Leveraged Top 2 Strategy is lower, thus better.
  • Looking at maximum days under water in of 223 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to BTC-USD (223 days).

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.'

Applying this definition to our asset in some examples:
  • Looking at the average time in days below previous high water mark of 115 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 (258 days)
  • Compared with BTC-USD (64 days) in the period of the last 3 years, the average days under water of 57 days is smaller, thus better.

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.