Alpha Navigator: Quest for Alpha [August 2023]

Asset classes dipped in August; BTC and ETH underperformed. No surprises from the central bankers summit at Jackson Hole. China intensifies economic stimulus.

Sep 06, 2023 Alpha Navigator Institutional Report

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Executive Summary

  • Major asset classes mostly dipped in August, with BTC and ETH the relative underperformers.
  • At the Jackson Hole summit of central bankers, Federal Reserve (Fed) Chairman Powell reiterated the Fed’s willingness to further raise interest rates as needed and also highlighted the US economy might not be cooling as expected. European Central Bank (ECB) President Lagarde echoed Powell’s remarks, stating the ECB will maintain a restrictive monetary policy until Eurozone inflation reaches their 2% target. Reaction from the markets was muted, given the familiarity of the underlying messages.
  • Government agencies in China have embarked on a coordinated effort to boost the Chinese economy, which has been under pressure from a housing crisis, weak exports, and rising unemployment. The foreign currency reserve requirements for banks have been lowered and some tax breaks increased. A series of measures aimed at propping up the real estate sector, such as relaxed borrowing conditions and tax deductions, have also been introduced.
  • BTC’s 1-month correlations with other assets flipped into positive territory, in contrast to mostly negative correlations back in July.
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  • BTC options implied volatilities (vols) crept up during August, but are still at subdued levels.
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  • Market-Neutral Pair Trader hunts for strongly correlated tokens. Such pairs with price ratios that deviate from historical averages can be considered candidates for a market-neutral pair trade (i.e., long the underperforming token and short the outperforming token, with equal dollar value positions in each token to enable market neutrality).
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  • For the BTC vs. ETH pair, the price ratio (BTC price divided by ETH price) continues to be flat in August, staying around the 1-standard deviation (SD) ceiling. Ethereum is set to launch a new testnet called Holesky on 15 September. Grayscale’s recent win against the SEC could have implications for spot Bitcoin ETFs. Alpha Navigator BTC ETH Price Ratio
  • Our style-factor screens track momentum, value, growth, and risk for the Layer-1 and Layer-2, DeFi, GameFi, 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 and TVLs fell across the board in August. Alpha Navigator Style Factor Screens
  • Our events section shows recent and upcoming events for selected tokens, as well as crypto-related conferences and important macroeconomic events. Alpha Navigator Events Section

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


Andrew Ho (Senior Research Analyst)

Research & Insights Team

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