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.

'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:- Looking at the total return, or performance of 953.6% 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 (257.2%)
- Compared with BTC-USD (202.1%) in the period of the last 3 years, the total return, or increase in value of 546.9% is greater, thus better.

'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.'

Which means for our asset as example:- Compared with the benchmark BTC-USD (29%) in the period of the last 5 years, the annual performance (CAGR) of 60.2% of Crypto & Leveraged Top 2 Strategy is larger, thus better.
- During the last 3 years, the annual performance (CAGR) is 86.2%, which is larger, thus better than the value of 44.5% from the benchmark.

'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 (69.7%) in the period of the last 5 years, the historical 30 days volatility of 56.8% of Crypto & Leveraged Top 2 Strategy is lower, thus better.
- Looking at 30 days standard deviation in of 60.8% in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (66.5%).

'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:- Compared with the benchmark BTC-USD (48%) in the period of the last 5 years, the downside volatility of 37.4% of Crypto & Leveraged Top 2 Strategy is smaller, thus better.
- During the last 3 years, the downside deviation is 38.8%, which is lower, thus better than the value of 44.7% from the benchmark.

'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:- Looking at the Sharpe Ratio of 1.02 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 (0.38)
- Looking at Sharpe Ratio in of 1.38 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to BTC-USD (0.63).

'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.'

Applying this definition to our asset in some examples:- Looking at the ratio of annual return and downside deviation of 1.54 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 (0.55)
- Looking at excess return divided by the downside deviation in of 2.15 in the period of the last 3 years, we see it is relatively higher, thus better in comparison to BTC-USD (0.94).

'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.'

Applying this definition to our asset in some examples:- The Downside risk index over 5 years of Crypto & Leveraged Top 2 Strategy is 29 , which is lower, thus better compared to the benchmark BTC-USD (41 ) in the same period.
- During the last 3 years, the Downside risk index is 32 , which is smaller, thus better than the value of 44 from the benchmark.

'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 DrawDown of -64.8 days 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 (-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 -64.8 days is higher, thus better.

'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 (389 days) in the period of the last 5 years, the maximum days below previous high of 389 days of Crypto & Leveraged Top 2 Strategy is higher, thus worse.
- Looking at maximum time in days below previous high water mark in of 389 days in the period of the last 3 years, we see it is relatively larger, thus worse in comparison to BTC-USD (389 days).

'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.'

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 119 days, which is lower, thus better compared to the benchmark BTC-USD (136 days) in the same period.
- Looking at average days below previous high in of 119 days in the period of the last 3 years, we see it is relatively lower, thus better in comparison to BTC-USD (124 days).

Historical returns have been extended using synthetic data.
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- 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.