Truvius Quantamentals - 11/3/23

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This week the U.S. Federal Reserve kept rates on pause (in line with market expectations) amid slowing inflation and signs of broad-based economic strength. Recent economic data showing a slowdown in hiring helped drive equity markets higher, suggesting investors view the data as a sign the economy is cooling and providing the Fed reason to keep interest rates unchanged. Following heightened recession concerns earlier this year, the Fed’s goal of a “soft-landing” may be taking shape. From a crypto markets perspective, a stabilizing macroeconomic backdrop may help sustain recent bullish tailwinds for digital assets.

Within crypto markets, asset prices rallied meaningfully over the trailing month, largely driven by positive investor sentiment surrounding the potential SEC-approval of a Bitcoin spot ETF. The rally reflects anticipation of institutional inflows and greater overall market liquidity.

While Bitcoin was a key outperformer — driven specifically by the recent bullish regulatory outlooks from investors — other assets and alternative crypto sectors (sometimes generalized as “AltCoins”) also rallied strongly, particularly ChainLink (Utilities & IT sector), 0x Protocol (DeFi sector), and Solana (Smart Contract Platform sector), which are all constituent assets of Truvius Multi-Sector portfolios.

Asset Class Roundup

Correlations (Trailing 1-Month)

Over the last month digital assets have exhibited notably low correlation to equity 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:

Performance

Equities and digital assets have exhibited positive performance YTD. Digital assets in particular have demonstrated strong YTD performance, partially rebounding from notable 2022 drawdowns.

Over the trailing month, both equities and bonds rose, gaining amid the Fed keeping rates unchanged and economic data showing a slowdown in hiring (a cooling jobs market may support the narrative for the Fed to keep rates unchanged).

Bitcoin was the key outperformer over the trailing month, with strong positive performance sparked by an uptick in bullish regulatory outlooks that an SEC-approved spot Bitcoin ETF is on the horizon. The arrival of a spot crypto ETF may give way to sudden institutional inflows, drawing sizable waves of investors into the asset class and adding significant liquidity to the market.

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

Volatility (Annualized)

Realized volatility saw an uptick over the trailing month compared to the trailing 3-month period, particularly equities and commodities. 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:

Digital Assets

Performance

All five Truvius sectors exhibited positive performance for the trailing one-month period on the back of aforementioned bullish investor sentiment toward a possible SEC-approved Bitcoin spot ETF as well as company-specific factors for certain altcoins like Solana (which belongs to the Truvius Smart Contract Platform Index). Bitcoin belongs to the Truvius Value Transfer Index:

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:

  • AMP: attractive network activity

• Assets with weaker recent quantamentals:

  • LDO: weaker market dynamics and less attractive network activity

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 11/3/22 - 11/2/23. 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 11/3/23, 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.