Truvius Quantamentals - 8/8/23

Aug 8, 2023

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U.S. monetary policy is at forefront of market news as investors carefully assess whether the Federal Reserve will continue hiking interest rates, and for how long, after raising it to its highest level in 22 years from 5.25% to 5.5%. Additionally, the U.S. Treasury’s credit rating was downgraded last week by Fitch Ratings from AAA to AA+, citing weaker governance in the U.S. political system.

Volatility for most major asset classes increased slightly last week but not drastically, suggesting investors may not view recent events as having immediate fundamental impacts on markets overall, particularly given a relatively strong U.S. labor market.

Be on the lookout this week for the following important economic data releases, which will play a critical for investors in determining where inflation stands and what actions the Fed may (or may not) take:

  • Thursday, Aug. 10: consumer inflation data (CPI)

    • These numbers provide a gauge of inflation by looking at changes in prices paid by consumers for a representative basket of goods and services.

  • Friday, Aug. 11: producer price data (PPI)

    • These data also provide a gauge of inflation but from the manufacturer’s perspective (vs. the consumer) as they measure how prices have changed based on changing input costs.

Asset Class Roundup

Correlations (Trailing 1-Month)

Over the last month crypto has exhibited low-to-moderate correlation to major asset classes, supporting its potential role as a portfolio diversifier within a broad overall asset mix:

Performance

Nearly all major asset classes have exhibited positive performance YTD. Digital assets in particular have demonstrated strong YTD performance, partially rebounding from significant headwinds in 2022.

Over the trailing month, Bitcoin underperformed equity markets while the Truvius DeFi Fundamentals Portfolio and S&P GSCI commodities index* outperformed meaningfully:

*The S&P GSCI index is primarily concentrated in energy commodities.

Volatility (Annualized)

Realized volatility has tapered down over the trailing year across all major asset classes, but trailing 1-month volatility has generally seen a slight increase compared to last week’s trailing 1-month figures following recent monetary policy-related events:

Digital Assets

Performance

Digital assets have shown strong performance for the YTD period. More recently, over the trailing 1-month period Bitcoin and most other digital asset sectors sold off, while the DeFi sector exhibited gains. The actively managed systematic Truvius DeFi Fundamentals Portfolio outperformed the passive Truvius DeFi Index over the month:

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:

    • MKR: attractive network activity

  • Assets with weaker recent quantamentals:

    • YFI: deteriorating trading dynamics and network activity

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Data and Disclosures

Data is for the period 8/9/22 - 8/8/23. 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 8/8/23, 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 Truvius DeFi Fundamentals Portfolio backtest uses an ex-ante annualized tracking error target of 20% relative to the Truvius DeFi Index. The various Truvius Sector Indices used herein are weighted by circulating market capitalization. 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.