Hey guys.
I’ve been pretty frustrated with the speculation and baseless price predictions in the cryptocurrency market. So I took the boring, old-school concept of indexing and applied it to cryptocurrencies.
The index tracks the top 20 cryptocurrencies by market capitalization using a weighted-cap indexing methodology. Each coin cannot go over 10% of the entire portfolio. The excess is redistributed to any of the top 20 coins under 10% by weighted market capitalization until the entire sum of the portfolio adds to to 100%.
The top 20 coins makes up ~87% of the cryptocurrency market. For comparison the S&P 500 represents ~75% of the US stock market.
At first I was calculating and executing this strategy by hand. But monthly rebalancing took me forever to do and was extremely tedious. So, I made an algorithm to do it instead. It uses the Binance exchange API to facilitate these trades.
Last month, I launched a hosted version that anybody can use. It’s called HodlBot. I’ve only shared it with a few cryptocurrencies communities and /r/algotrading thus far. But I thought it may interest some of you here that are considering making cryptocurrency a small part of your overall investment portfolio.
I’ve backtested the index against 3 years of historical data and talk about it here. Take the backtest data with a grain of salt. The crypto market has been on fire in the last 3 years.
In the one and a half months of live trading, the indexing strategy was up 99%. Performance details and transaction logs here.
If you’re thinking about checking it out, I just want to pass a long one important disclaimer:
HodlBot is a long-term, passive, low-cost, indexing strategy. HodlBot does not actively trade, it does not try to beat the market. HodlBot only tries to capture the risk & performance of the market as a whole, and lower your alpha and your unsystematic risk.
I’ve had to explain this again and again over in the cryptocurrency subs, but I think you guys should understand this a lot better since most of you should be pretty familiar with indexing.
The cryptocurrency market is really volatile as a whole. So for an average investor, I don’t recommend putting more money than you would normally allocate to high-risk assets. But if you believe in the tech (or just want to hedge your bets), then indexing is a great way to bet on the market as a whole. It’ll save you the headache from trying to pick out the winners.
Thanks you guys for reading. I’d love it if you guys could check it out and let me know what you think.
More details about the indexing methodology are available here.
Submitted May 13, 2018 at 09:44AM by haggenballs https://ift.tt/2KjE0eW
