Industry Insider: A Diversified Cryptocurrency Portfolio Will Outperform Bitcoin
Former Goldman Sachs trader turned crypto fund manager Christopher Matta says it’s better to invest in a group of cryptocurencies as opposed to only investing in Bitcoin.
Matta’s company, Crescent Crypto Asset Management, has a number of policies in place to counter the volatility of the altcoin market.
He told CNBC it starts with using a 90-day average on the price of each coin to determine its true value.
“We see some of these coins explode in value and jump into the top 20. They really need to sustain that value to prove themselves as a real true investment. So it needs to meet that threshold to stay in the portfolio.
We also have controls around liquidity measures. It has to meet certain thresholds and be available on multiple exchanges that are available here in the United States. And actually, custody is a big piece for us. We won’t hold a coin that you can’t hold in cold storage. We want to make sure people are able to store these in the safest way as you constantly hear about these exchange hacks. We don’t want our clients or the index to really be taking that risk.”
Matta’s recommendation comes despite the correlation between Bitcoin and the altcoin market.
“There’s various levels of correlation between these coins. But holding a basket of 20 versus just holding Bitcoin, you’re going to get better absolute end-risk adjusted returns because of that diversification benefit that you get.
Even though each coin may be incremental, it’s still better than holding something like Bitcoin. Your drawdowns will be less – less volatility with holding a diversified basket.”
Matta is one in a long list of Wall Street traders and bankers leaving traditional financial institutions to jump into cryptocurrency. He left Goldman Sachs soon after an offer to become a vice president, deciding instead to launch Crescent Crypto Asset Management late last year.
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Val
Jun 17, 2018In building https://nazcabot.io, we’ve ran a lot of backtests with various diversification and rebalancing strategies. Overall we’ve found that it’s true that diversifying has its benefits in the crypto world, even in period of strong overall correlation. Would love to hear more specifically how Crescent Crypto chooses their assets and if they keep them balanced vs usd or not?
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Comments 1
Val
Jun 17, 2018In building https://nazcabot.io, we’ve ran a lot of backtests with various diversification and rebalancing strategies. Overall we’ve found that it’s true that diversifying has its benefits in the crypto world, even in period of strong overall correlation. Would love to hear more specifically how Crescent Crypto chooses their assets and if they keep them balanced vs usd or not?