Alpha Navigator: Quest for Alpha [September 2023]

Risk assets end 3Q 2023 mostly down on a QoQ basis, but YTD paints a more positive picture. Inflation retreats. US avoids a government shutdown.

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Executive Summary

• Asset classes continued to drop in September, although Commodities managed to eke out a small gain.

• Decelerating inflation data out of the US has helped to lift recent market sentiment. US core personal consumption expenditures (PCE) increased by 0.1% MoM in August, the slowest pace since 2020. On the monetary policy front, the Federal Reserve (Fed) kept interest rates unchanged at the target range of 5.25%-5.5% last month. Meanwhile, concerns about a potential US government shutdown were alleviated, with lawmakers reaching a short-term funding agreement.

• Risk assets ended 3Q 2023 mostly down on a QoQ basis, although YTD paints a more positive picture, particularly for crypto with BTC and ETH up +62.1% and +39.1%, respectively. Notable macro events upcoming in October are new inflation data for the US and more interest rate decisions from the European Central Bank (ECB), Bank of Japan (BoJ), and the People’s Bank of China (PBoC).

• BTC’s 1-month correlations with other assets are mostly negative.

• BTC front-end (e.g., 1-week) options implied volatilities (vols) drifted down in September, while back-end vols (e.g. 6-month) crept upwards.

• Market-Neutral Pair Trader hunts for strongly correlated tokens and potential market-neutral pair trades.

• For the BTC vs. ETH pair, the price ratio (BTC price divided by ETH price) remains around the 1-standard deviation (SD) ceiling.

• Our style-factor screens track momentum, value, growth, and risk for the Layer-1 and Layer-2, DeFi, Gaming, and NFT categories. Below is the screen for selected top crypto tokens by market cap in the Layer-1 and Layer-2 category. Token prices mostly continued to fall in September. ATOM posted positive gains in TVL.

• Our events section shows recent and upcoming events for selected tokens, as well as crypto-related conferences and important macroeconomic events.

Read the full Alpha Navigator report: Alpha Navigator: Quest for Alpha [September 2023]

Author

Andrew Ho (Senior Research Analyst)

Research & Insights Team

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