Truvius Quantamentals - 2/1/2024

Feb 1, 2024

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Interest rates are back in the headlines as both the U.S. Federal Reserve and Bank of England kept rates unchanged at yesterday's FOMC meeting and today’s MPC meeting, respectively, striking a cautious tone in line with market expectations and likely helping stabilize both equity and bonds markets. The focus of interest rate debate has turned to when and how much the Fed will lower rates given inflation falling at fast-than-expected levels: “Too soon, and inflation could rise again. Too late, and unemployment might should higher,” says WSJ’s chief economics correspondent Nick Timiraos.

Despite a more dovish monetary policy roadmap, stock indices slipped over the trailing week as investors grappled with geopolitical tensions, particularly U.S.-Houthi conflict in the Red Sea region threatening global shipping business as well as potential instability within Ukraine’s military leadership amid the country’s war with Russia.

Digital asset markets started 2024 with an uptick in volatility and wide performance dispersion across sectors, generally selling off overall.

Digital assets started the year exhibiting elevated volatility on the heels of the spot Bitcoin ETF regulatory approval.

Megacap assets BTC and ETH exhibited some resilience following the regulatory approval and subsequent frenzy of spot ETF offerings for Bitcoin earlier this year. Institutional interest appears to remain a driving force behind crypto market support as traditional asset managers allocate resources to digital assets.

Asset Class Roundup

Correlations (Trailing 1-Month)

Over the last month digital assets have exhibited low correlation to equity markets and meaningfully negative correlation to bond and commodity markets. Overall, correlations between crypto and other major asset classes remain low to negative, supporting its potential role as a portfolio diversifier within a broad overall asset mix:


Volatility (Annualized)

Realized volatility for digital assets saw an uptick over the trailing 3-month period, likely owing to the run-up in prices that occurred prior to the spot Bitcoin ETF SEC-approval earlier in the month. Crypto volatility remains elevated relative to other asset classes, but volatility levels across asset classes overall are still generally in line with norms for the trailing-year period:


Quantamentals

Our models incorporate a combination of proprietary on-chain and off-chain digital “quantamentals” that we consider meaningful indicators of digital asset strength. We apply a quantitative process to these fundamental signals in order to systematically monitor network (on-chain) and trading (off-chain) activity.

This week, we look at a subset of assets held in the Truvius DeFi Fundamentals Portfolio:

  • Assets with stronger recent quantamentals:

    • COMP: attractive on-chain strength and network activity

  • Assets with weaker recent quantamentals:

    • DYDX: less attractive network activity and weaker fundamentals

Learn more about how Truvius systematically harnesses on-chain and off-chain data to inform portfolio positioning for our actively managed products with Factor Foundations for Digital Assets.

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Data and Disclosures

Data is for the period 2/1/23 - 1/31/24. Pricing data shown above for illustrative Truvius products are sourced from Santiment, Messari, and Token Terminal. Prices for non-digital asset classes are sourced from Yahoo Finance and represent the following:

The Truvius products shown herein represent hypothetical backtests and do not represent live, currently investable products. The universe of assets for these hypothetical backtests include only tradable assets currently offered by Gemini as of 12/31/23, excluding meme tokens, stablecoins, and wrapped/pegged tokens. The backtests shown herein are rebalanced weekly, gross of fees, and net of t-costs, with a 0.10% per-trade t-cost assumption. The various Truvius Sector Indices used herein are weighted by a circulating market capitalization metric. Past performance does not guarantee future results.

Disclaimer

This Truvius Quantamentals commentary has been prepared by Truvius (the “Company”) solely for informational purposes and should not be construed as legal, business, tax, regulatory, accounting, investment or other advice. The information contained herein does not purport to be all-inclusive or to contain all of the information a reader or prospective or existing investor may desire. In all cases, readers and interested parties should conduct their own investigation and analysis of the Company, its products, and the data set forth in this information. The Company makes no representation or warranty as to the accuracy or completeness of this information or its construction and shall not have any liability for any representations (expressed or implied) regarding data or information contained in, or for any omissions from, this information. This Information includes certain statements, backtested data, and estimates provided by the Company with respect to the historical performance of the Company, its products, and other asset classes described above. Such statements, backtested data, estimates, and projections reflect various assumptions by management, which assumptions may or may not be correct. No representations are made as to the accuracy of such statements, backtested data, estimates or projections. Inevitably, some assumptions will not materialize, and unanticipated events and circumstances may affect the ultimate financial results of the Company and its hypothetical products. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections or expected performance of products may be inaccurate in any material respect. The Company's and its products’ actual future results may differ materially from those suggested by both simulated historical and forward-looking statements, depending on various factors including those described in this material or any other written or oral communications transmitted by the Company. Neither the U.S. Securities and Exchange Commission nor any U.S. state or non-U.S. securities commission has reviewed or passed upon the accuracy or adequacy of this Truvius Quantamentals commentary. Any representation to the contrary is unlawful.