Alphabot’s Crypto Portfolio Update | AlphaWeek

In April, we created an index-like portfolio of major cryptocurrencies; it was constructed using the five coins with the highest market value each year (measured at year-end and then held for one year). This approach has shown interesting results over more than seven years of analysis, basically doubling the returns of Bitcoin alone and outperforming stocks.

Given the continued challenges risk assets face in 2022, we wanted to check in and see how our crypto index is doing so far this year, and so far the results seem to be in line with our expectations, at least in terms of comparison to a simple coin investment. While all three instruments have lost money so far this year, and both cryptocurrencies have underperformed public stocks, the Top 5 portfolio has shown lower volatility and a smaller drawdown. The effect has lasted since the beginning of June, but earlier in the year the results have been mixed.

Figure 1: YTD VAMI Chart of AlphaBot’s Top 5 Crypto “Index” vs. Bitcoin, S&P 500

Source: AlphaBot

Figure 2: YTD performance statistics for AlphaBot’s top 5 crypto “index” vs. Bitcoin, S&P 500

Source: AlphaBot

It is worth noting that the volatility in the crypto space is much higher than that of stocks (with our instruments, close to double), so relative performance (or underperformance) should be taken from a point of view that takes volatility into account. If we look at a normalized volatility chart (set at 15% y/y), the excess return to stocks becomes much less obvious, also shrinking to just around 3 months, again from mid-June.

Figure 3: Volatility Adjusted YTD Performance of Top 5 Crypto Indices vs Bitcoin and S&P 500

Source: AlphaBot

Normalizing the volatility also makes the distinction between our portfolio and Bitcoin less pronounced. Of course, a few months of returns can show all kinds of effects, and that’s the longer time frame needed to evaluate a particular approach. So we will continue to monitor this build and come back to it in a few more months. Watch!

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Dmitri Alexeev is the founder and CEO of AlphaBota collaborative platform for alternative investment research

The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group Ltd.