Summary of 2022

TLDR;

• Momentum ETH/BTC strategy outperformed by 6.4%
• Trend ETH/BTC strategy underperformed by 0.9%
• Both strategies helped to reduce volatility
• Market conditions have been tough since inception of strategies on 29 Oct 2022

Strategy token prices can be seen here.

Since inception on 29 Oct 2022, Momentum strategy outperformed ETH 50/BTC 50 benchmark by 6.4% and Trend strategy underperformed by 0.9%, both with significantly lower volatility than the benchmark.

Market conditions have been difficult for long-only strategies recently. The collapse of FTX brought markets down and the strategies were not able to anticipate the FTX fiasco. Thus, since inception Momentum strategy is down by 16.9% and Trend strategy by 24.3%. Equally weighted ETH/BTC benchmark is down 23.4% at the same time.

December was characterized mostly by sideways markets with slight negative trend. However, price movement included both positive and negative significant jumps (i.e. near 5% intraday movements). This is clearly unfavorable environment for ClearGate Momentum and Trend strategies. If positive movement is quickly followed by negative jumps, the strategies can provide volatility reduction but are likely to underperform in otherwise sideways market. Momentum strategy was down 8% in December and Trend strategy by 6.5% at the same time when benchmark was down 4%.

The strategies have behaved as expected in current market conditions. They continuously help to lower the volatility of ETH and BTC portfolio and provide expected returns. The performance benefits of the strategies are expected to emerge in medium to long term perspective. Trending markets are favorable to the strategies but sideways markets which include price jumps, are challenging to the performance. Given historical data, the strategies should be able to compensate lower returns of sideways markets during trending periods. Due to being long-only and not using leverage, the strategies can outperform the benchmark only during times when market is going down.

ETH-BTC Momentum strategy

The ETH-BTC Momentum strategy is more responsive to market movements but is designed to keep holding a position in ETH and BTC no matter what is happening. Around a total of 50% of assets are supposed to be in ETH and BTC all the time with the current strategy configuration. 

The ETH-BTC Trend strategy

The ETH-BTC Trend strategy is designed to take advantage of price trends and will be somewhat slow to react to news depending on volatility. In otherwise volatile markets, it will not react that easily because in order to ride trends, you have to tolerate some volatility. So, when we get a news event which will significantly  move the market, the trend strategy is not supposed to react by design. The trend strategy will completely exit the market when it detects downward trend, will be 100% invested in a combination of ETH and BTC when it detects upward trend and may hold some combination of risky assets during sideways markets. 

You can find our strategies on Sommelier. Please use the provided contact details or the form below to ask any questions you might have.