- 12.02.2020

Crypto investment strategy 2019

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Conclusion 1. General Characteristics of Cryptocurrencies In this research we analyze the top 14 cryptocurrencies by traded notional reported in Table 1.

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Table 1 Top 14 cryptocurrencies by traded notional Figure 1 shows the percentage of traded notional by cryptocurrency as of December As it can be seen from it, Bitcoin and Ethereum constitute the majority of traded notional, with a combined total of Figure 1 Distribution traded notional crypto investment strategy 2019 14 cryptocurrencies Figure 2 shows the closing price of these cryptocurrencies from March until December As it can be seen from it, cryptocurrencies experienced two major crises, one from tothe other one from early until present.

It also shows best bitcoin tumbler cryptocurrencies are highly crypto investment strategy 2019, exhibiting similar price behavior. Figure 2 Closing price top 14 cryptocurrencies Figure 3 shows the traded volume on a log scale click here the considered cryptocurrencies.

As it can be seen from it, there has crypto investment strategy 2019 a general uptrend in traded volume crypto investment strategy 2019 with the high increase in price of the crypto basket, following by a decrease in both price and traded volume from January Figure 3 Traded volume top 14 cryptocurrencies Figure 4 shows similar results regarding the traded notional on a log scale over time.

Figure 4 Traded notional top 14 cryptocurrencies log scale Figure 5 shows the contribution to the total notional traded over time. Crypto investment strategy 2019 5 Share traded notional top 14 cryptocurrencies over time Figure 6 reports the rolling day volatility for Bitcoin crypto investment strategy 2019 the crypto basket.

Figure 6 Rolling volatility Bitcoin and crypto basket As it can be seen from it, crypto is a very volatile asset class, with an average Bitcoin volatility of Additional evidence why institutional investors have not invested in crypto yet:most of the trading in cryptocurrencies is driven by retail investors and not crypto investment strategy 2019 ones until present, because of the crypto investment strategy 2019 risks present in the asset class, among which too high market risk due to the exceptional levels of volatility crypto investment strategy 2019 in this asset class, which is too large for most of all institutional investors who want to deploy a significant amount of capital.

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Performance buy-and-hold investment strategy in Bitcoin Figure 7 shows the price of Bitcoin from March until December on a log scale. Figure 7 Performance passive buy-and-hold Bitcoin investment As it can be seen from it and from Table 2, Bitcoin experienced 2 major crises during the considered period.

Table 2 Stats Bitcoin crises Figure 8 shows the drawdown for a buy and hold strategy in Bitcoin, while Table 3 shows its drawdown statistics.

Figure 8 Drawdown buy-and-hold Bitcoin investment Table 3 Stats drawdown Bitcoin As it can be seen crypto investment strategy 2019 them, a buy-and-hold investment in Bitcoin experienced significant drawdowns, with a max drawdown of This means that a long-term investors would have lost that most of its investment if entered at a time when Bitcoin peaked in price, such as Januaryas many investors actually did crypto investment strategy 2019 of the widespread publicity that Bitcoin had in that period.

Figure 9 shows the distribution click daily returns in Bitcoin.

Figure 8 Drawdown buy-and-hold Bitcoin investment Table 4 shows the performance statistics of a buy-and-hold investment in Bitcoin during the considered period. This is also evidenced by the high kurtosis of The Sharpe ratio, crypto investment strategy 2019 shows here amount of return per unit of risk taken, is 1.

This figure is quite good compared to traditional asset classes like equities, which historically have a Sharpe ratio around 0. The previous data of a buy-and-hold investment performance in Bitcoin phone number support coinomi the importance of having an active investment strategy capable of mitigating losses during market downturns or potentially profit from it by going crypto investment strategy 2019.

Such a strategy will be analyzed in depth in section 4. Performance buy-and-hold investment strategy in a basket of cryptocurrencies Figure 10 shows the performance of a crypto basket equally invested in the top 14 cryptocurrencies by traded volume from March until December on a log scale.

Figure 10 Crypto investment strategy 2019 buy-and-hold crypto basket top 14 cryptocurrencies As it can be seen from it and from Table 5, the crypto basket experienced 2 major crises during the considered period, in a similar way to Bitcoin.

Table 5 Stats crises crypto basket Figure 11 crypto investment strategy 2019 the drawdown for the crypto basket, while Table 6 shows its drawdown statistics. Figure 11 Drawdown crypto basket Table 6 Stats drawdown crypto basket As it can be seen crypto investment strategy 2019 them, a buy-and-hold investment in the crypto basket experienced even worst drawdowns than Bitcoin, with a max drawdown of This means that a long-term investors would have lost that most of its investment if entered at vps for mining 2019 free time when the crypto basket peaked crypto investment strategy 2019 price, such as Januaryas many investors actually did because of the widespread publicity that Bitcoin had in that period.

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Figure 12 shows the distribution of daily returns in the crypto basket. Figure 12 Distribution daily returns crypto basket Table 7 shows the performance statistics of a buy-and-hold investment in Bitcoin during the considered period. Table 7 Performance stats crypto basket As it can be seen from crypto investment strategy 2019, similarly to Bitcoin the crypto basket potentially provides high returns, with a crypto investment strategy 2019 annual return of This is also evidenced crypto investment strategy 2019 an exceptionally high kurtosis of 27, which highlights the fat tail behavior of this asset.

The previous data show that a passive buy-and-hold investment in a crypto basket is almost the same as a pure buy-and-hold investment in Bitcoin. It also highlights that it is quite crypto investment strategy 2019 to pay management and performance fees typically to one of the many basket crypto funds that emerged importance in the past year, which charge alpha for providing beta instead.

As it can be seen in fact from the previous data, the performance of the crypto basket is almost the same as a passive Bitcoin investment, or even worst after taking transaction costs crypto investment strategy 2019 account. It is interesting to see why the crypto basket performance and Bitcoin are very similar.

Figure 13 shows the https://catalog-obzor.ru/2019/blackpool-gazette.html correlation among the top 14 cryptocurrencies in the crypto basket. As it can be seen from it, the average correlation between the analyzed cryptocurrencies is 0.

According to portfolio theory, an investor can receive benefits from portfolio diversification if the assets in the portfolio have low or negative correlation. As it can be seen from the data, it is not the case for cryptocurrencies, which makes the performance of the crypto basket very similar to a passive investment in Bitcoin.

Figure 13 Average correlation top 14 cryptocurrencies in the crypto basket In addition to the results in a passive buy and hold https://catalog-obzor.ru/2019/litecoin-future-2019.html in Bitcoin, this data highlights the importance of having an active investment strategy capable of mitigating losses during market downturns or potentially profit from it by going short.

Such a strategy will be analyzed in depth in the next chapter. Crypto investment strategy 2019 strategy is compared to a passive buy-and-hold investment in Bitcoin, and the performance of the crypto basket.

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The strategy volatility is set to have the same volatility as the crypto investment strategy 2019 basket to facilitate the comparison. As it can be seen from the figure, the strategy achieves a much better performance compared to both Crypto investment strategy 2019 and the crypto and consistent performance across both crypto investment strategy 2019 and bear markets.

As it can be seen from it and from Figure 15, the portfolio has much lower and faster to recover drawdowns. On the risk side, it has around crypto investment strategy 2019 same amount of volatility of the crypto basket per construction, and slightly crypto investment strategy 2019 volatility than Bitcoin.

As a result of the better return delivered with around crypto investment strategy 2019 same amount of risk, the strategy achieves a much better Sharpe ratio of 1.

As previously indicated, the max drawdown is also much less and faster to recover. As it can be seen from the results, read article strategy delivers real alpha, with a positive value of 0.

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The strategy delivers no beta and is uncorrelated click to see more both Bitcoin and the crypto basket.

This result is what should be expected by hedge funds, who are active investors that should deliver performance, as measured by alpha, irrespective of their benchmark and market conditions, as measured by beta.

On the contrary, most crypto funds charge alpha for beta. In fact, despite they being passive investors providing a simple inexpensive crypto basket, which has a high beta to Bitcoin, they charge the same fees that hedge funds require for delivering alpha based on extensive research.

This creates both big risks, but also good opportunities for active professional investors able to adopt the right investment strategy. Passive buy-and-hold investment in Bitcoin delivers large and long drawdowns: holding Bitcoin passively for the long-term provides long and big drawdown.

This highlights the need for an active crypto investment strategy that can potentially profit in both bull and bear market conditions by going both long and short. Crypto baskets have very similar performance to a passive investment crypto investment strategy 2019 Bitcoin:it is quite useless investing in crypto investment strategy 2019 basket of cryptocurrencies, since they deliver similar performance to a passive buy-and-hold investment in Bitcoin only.

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This is due to the high correlation crypto investment strategy 2019 cryptocurrencies mean of 0. In conclusion, crypto is a very volatile asset class. This creates big risks, but also big opportunities for the right strategy.

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