HEYBIT seeks alpha in crypto trades by beating the market.

But what is the alpha?

There are two types in how you make return.

You can follow and "bet on" the market, expecting the entire market will grow in the long term and allocating your money in a portfolio of assets that closely resembles (or so called "indexing") the market. This passive way of seeking market return is called beta.

Meanwhile, you can "beat" the market through active trading. And this active return is called alpha. However, seeking alpha is not an easy task.

Which is better: alpha or beta?

It is said that index funds or ETFs (that pursue beta) have outperformed nearly 90% of active funds (that pursue alpha) for the past decade, for the "equity" markets.

Generally speaking, indexing works well if the market value goes upward in the long-term, for example, like stock market.

But does indexing(beta) work in crypto market as well?

However, for crypto assets, we believe the circumstance is different because we are not yet certain whether the market will go up in the long-term as the intrinsic value itself is uncertain.

Let's compare if this is the case.

You can see that S&P500 which represents the equity market index shows pretty clear upward trend in the long-term.

However, Bitcoin which represents the crypto market index fluctuates wildly.

If you take any one or two year span, it is more likely that you will perform well for the equity than the crypto, especially in the past 2 years.

So it is relatively true that indexing may have performed well in the equity market, but it is much more unlikely in the crypto arena.

HEYBIT alpha vs HODL beta

If you compare the performance between the two from Aug. 1, 2018 to Mar. 31, 2020, the performance gap is striking.

  • HEYBIT alpha: 13.42%
  • HODL beta (holding 20% of BTC/ETH/XRP/BCH/EOS, some of the top market cap coins): -53.97%
BTC/ETH/XRP/BCH/EOS are all within top 10 in crypto market cap.
BTC/ETH/XRP/BCH/EOS are all within top 10 in crypto market cap. (Source: coinmarketcap.com, 05/28/2020)

The return difference between the two is 67.39%p in 20 months.

How did HEYBIT alpha perform in the 1Q20 downturn?

HEYBIT has outperformed not only some crypto indexing strategies but also other alpha-seeking hedge funds in the 1st quarter of 2020. (For more, see here)

Then why don't people all pursue alpha?

It's because active trading requires lots of knowledge and experience in investment and trading. That's why it is done by the top fund managers and even then, some of them fail to outperform their benchmarks because the market is tough to beat.

HEYBIT has shown its track record for the past 20 months as our quant team is constantly fine-tuning and enhancing the strategy to better seek alpha in the ever changing crypto market. We hope you can be part of this alpha-seeking journey.

*Disclaimer: Past performance does not guarantee future performance. HEYBIT is an automated trading service that takes on principal risk.

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