As the crypto asset boom is now cooling off, the crypto asset industry enters into a stage of upgrading. The industry has drawn inspiration from the operation model of traditional assets in infrastructure and popularization to enhance general investors’ acceptance and understanding of crypto assets. For instance, general investors can trade ETP, Bitcoin Tracker Euro and Ether Tracker Euro on NASDAQ, which means that investors with securities accounts on NASDAQ can trade crypto assets without opening accounts on cryptos exchanges. The convenience of trading crypto assets and traditional securities on the same exchange enables general investors to touch upon more aspects of crypto assets. This has brought about a thought-provoking question: what is the relationship between crypto secondary markets and traditional secondary financial markets ?
We need to acknowledge a trend before answering the question. Crypto asset products (such as ETP and index products) and infrastructure (such as crypto asset custodian services) enable crypto asset management to evolve from retail-oriented management to integrated management centering on family office, hedge fund and institutional investors. The stream of a large number of investment institutions brings more capital to the market, creating favorable conditions for the maturity and innovation of the market.
It is far from being enough for crypto secondary markets to only have assets but there’s also a need for people to manage them. Demand generates supply. Therefore, a unique phenomenon can be found in the secondary market: strategy research and development of crypto trading.
CryptoStrategies enjoys unique advantages in this regard. CryptoStrategies, a professional crypto asset management platform, is composed of many former Wall Street elites, mathematicians and senior strategists. Based on the core philosophy of governance of sharing economy and resources integration, the platform aims to create a unique crypto asset management ecosystem. Within the ecosystem, strategists provide high-quality strategies. Investors provide crypto assets and the platform provides professional analysis and trusteeship.
Where does CryptoStrategies look for strategies ?
By successively holding Wolf of Wall Street-Global Cryptocurrency Trading Competition, the platform has cultivated excellent strategy development teams including Keying Technology, Harry’s Magic Stone and promoted the application of arbitrage, trend following and discretionary strategies in crypto secondary markets.
How does CryptoStrategies distinguish good strategies from bad ones ?
The CryptoStrategies team had been working in the traditional secondary market for many years and has a mature quantitative rating system to select funds. Kenny Li, co-founder of the platform, used to be in charge of equity derivatives and convertible bonds in JP Morgan and Barclays Capital. Ran Yi, the other co-founder, previously worked on asset management on Wall Street, where he was responsible for the selection and introduction of options, futures and ETF outsourcing strategy teams and the construction of portfolios with different risk preferences based on the characteristics of different strategies. According to CryptoStrategies, crypto asset market can learn from strategy development methods in traditional secondary market and key indicators of both traditional assets and crypto assets need to be analyzed including liquidity, relative value, correlation and Sharpe ratio.
Take Sharpe ratio as an example. A recent study of Yale University reveals that at the daily and weekly frequencies, bitcoins’ Sharpe ratios are about 50% and 75% higher than those of stocks for the comparable time period. The higher the Sharpe ratio, the greater the excess returns of assets and the better the quality of investment. Therefore, crypto assets enjoy greater advantages compared with traditional secondary market assets from quantitative perspective.
How should we view the relationship between crypto asset secondary market strategies and traditional secondary market strategies ?
CryptoStrategies discovers that by observing prevailing strategies in the traditional secondary market, it can predict popular strategies in crypto asset secondary market in the future. For example, algorithmic trading, popular in recent years in the hedge fund industry, also had good backtest results after going through numerous backtests in crypto asset trading data. It has won recognition in the industry and has, to a larger extent, been gradually applied in crypto assets. Take the trend following strategy as an example. Algorithm trading uses a program to realize automatic order placing, uses big data analysis to probe into market sentiment, goes long or goes short in the market according to the trends and make the most of the high volatility of crypto assets to realize high returns.
Crypto assets account for only 0.0011% of the 28 trillion USD global wealth, which means there is still huge potential in the development of crypto assets. By combining quantitative experience in traditional secondary market with the opportunities brought by crypto assets, CryptoStrategies will continue to make use of its own experience and advantages to lead the development of crypto asset market.
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