Truvius Quantamentals - 9/6/23

Sep 6, 2023

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Stronger-than-expected U.S. economic data has recently given rise to a more optimistic view on the U.S. economy among some analysts, strengthening the outlook for a "soft landing" amid recession predictions in today’s high inflation environment. Markets continue to eye whether the Federal Reserve will respond via interest rate hikes, pauses, or cuts.

Within the digital assets industry, two high-profile asset management and exchange businesses, Grayscale and Coinbase, notched advancements against regulatory headwinds, finding support in a recent legal ruling and receiving NFA approval for Bitcoin and Ethereum futures, respectively. While these developments are currently limited to megacap assets Bitcoin and Ethereum, they are bullish for the asset class overall, clearing a potential path for large-scale adoption of multi-asset spot and futures ETFs in the U.S.

Longstanding traditional asset management players like Fidelity continue to build their crypto talent pipelines as a more thoughtful relationship between regulators and digital asset investment practitioners slowly takes shape.

Asset Class Roundup

Correlations (Trailing 1-Month)

Over the last month crypto has exhibited increasing but still low-to-moderate correlation to stocks and bonds, 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 notable 2022 drawdowns.

Over the trailing month, digital assets including Bitcoin notably underperformed equity markets and other asset classes. Digital assets sold off as investors assess the health of the U.S. economy and process the Federal Reserve’s interest rate intentions following Fed Chair Jerome Powell’s annual speech at the Jackson Hole Economic Symposium — a continued high interest rate environment could present demand challenges for both stocks and crypto:

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

Volatility (Annualized)

Realized volatility has continued to trend downward since a year ago:

Digital Assets

Performance

While some of the larger cap digital asset sectors like Value Transfer and Smart Contract Platform have generally shown strong positive performance for the YTD period, the trailing 1-month and 3-month periods have exhibited meaningful declines across sectors, particularly the more alternative Media and Metaverse sector.

The actively managed systematic Truvius DeFi Fundamentals Portfolio outperformed the passive Truvius DeFi Index in all four periods:

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:

    • SUSHI: 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 9/6/22 - 9/5/23. 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 9/5/23, 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.