Alpha Navigator: Quest for Alpha [July 2023]

Risk assets continued their positive price action in July, although BTC dipped slightly. Macro calendar is quiet up until mid-August where we have the US CPI and release of FOMC minutes.

Aug 03, 2023 Alpha Navigator Institutional Report

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Executive Summary

  • Risk assets continued their positive price action in July, although BTC dipped slightly.
Price Performance
  • The US Federal Reserve (Fed) raised interest rates by 0.25 percentage points last week (following a pause in June), bringing its benchmark rate to a range of 5.25% to 5.50%, in a move largely anticipated by markets. The European Central Bank (ECB) also increased interest rates by another quarter of a percentage point, bringing its benchmark rate to 3.75%. Eurozone inflation has been falling – to 5.5% in June from 6.1% in May – but remains well above the ECB’s 2% goal.
  • In Asia, the Bank of Japan (BoJ) kept rates at -0.1% and modified its yield-curve control policy. The central bank said it will conduct yield curve control with “greater flexibility”, treating upper and lower bounds as references, not fixed limits. China’s manufacturing activity slightly improved in July – the manufacturing Purchasing Managers’ Index (PMI) came in at 49.3, up from 49.0 the previous month, but still below the 50-point mark, which separates contraction from growth.
  • The macro calendar is relatively quiet up until around mid-August where we have the US Consumer Price Index (CPI) print and release of FOMC minutes.
  • BTC’s 1-month correlations with other assets were mostly negative. Over a longer-term 12-months, BTC’s correlation with gold remains strong.
BTC Price Correlation
  • BTC options implied volatilities (vols) fell in July, with front-end vols currently at 1-year lows.
BTC Options ATM Implied Volatility
  • 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 DOT vs. ADA pair, this played out in favour of ADA since our last issue as the price ratio (DOT price divided by ADA price) met resistance at the 2-standard deviation (SD) ceiling and trended down. Cardano launched Mithril, a stake-based signature protocol that enhances the speed and efficiency of node syncing times on the mainnet.
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  • 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. Layer-1 and Layer-2 token prices were all up in July. SOL and OP were the two best performers.
  • Our events section shows recent and upcoming events for selected tokens, as well as crypto-related conferences and important macroeconomic events.
Events section

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


Andrew Ho (Senior Research Analyst)

Research & Insights Team

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