Alpha Navigator: Quest for Alpha [June 2023]

Asset classes finished 1H 2023 strongly with crypto in the lead. Decelerating US inflation readings could ease market concerns for the time being. BTC options implied vols remain muted.

Jul 05, 2023 Alpha Navigator

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Executive Summary

  • Major asset classes finished the first half of the year on a strong note, with equities posting double-digit percentage gains. Notably, the tech-heavy NASDAQ-100 had the best first-half performance on record and major constituent Apple’s market cap surpassed US$3 trillion – the only company to ever reach that level. However, even this strong result from equities was outshone by crypto as BTC and ETH returned +83.0% and +54.2%, respectively. Price Performance Jun 2023
  • The US Personal Consumption Expenditures (PCE) Price Index, which tracks inflation, declined in May to 3.8% from 4.3% the previous month. Core PCE, which excludes volatile food and energy costs and is watched closely by the Federal Reserve, also fell to 4.6% from 4.7%. The decelerating inflation readings potentially eases market concerns for the time being following a brief rise in April’s data. Key upcoming US macro data are CPI on 12 July and the Federal Reserve’s interest rate decision on 26 July.
  • ETH’s 1-month correlation with other asset classes are mostly negative. ETH Price Correlation Jun 2023
  • BTC options implied volatilities (vols) have risen during June but are still at relatively muted levels. 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). Market-Neutral Pair Trader
  • For the BTC vs. ETH pair, this has been playing out in favour of BTC since our last issue, as the price ratio (BTC price divided by ETH price) rose in the past month and is now past the 1-standard deviation (SD) ceiling. BTC ETH Price Ratio
  • Our style-factor screens track momentum, value, growth, and risk for crypto tokens in 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 tokens continued to fall in price during June, with ETH the relative outperformer. Style Factor Screens Jun 2023
  • Our event driven section shows recent and upcoming catalysts for selected tokens, as well as crypto-related conferences and important macroeconomic events. Event Driven Section

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


Andrew Ho (Senior Research Analyst)

Research & Insights Team

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