This is the Digital Asset Investment Platform HEYBIT.
At the beginning of this year, we detected changes in the market environment and positioned ourselves to prioritize stability over maximizing expected returns in uncertain circumstances. After thorough backtesting and validation, we began offering a new strategy called "Alpha" to our clients.
Considering the high volatility and rapid cycles of coin creation and extinction in the crypto market, we reduced the number of traded coins to focus on more stable assets. We also reduced portfolio exposure to rapid market fluctuations by adopting a market-neutral strategy.
Over the course of the year, we realized that our initial assumptions were optimistic, and we fell short of meeting the expectations of clients who were expecting profit generation.
In our earnest effort to seek your understanding, we would like to provide more detailed explanations of the situation.
Alpha Strategy Review
Unpredictable market dynamics that make long-term and stable statistical analysis impossible.
Cumulative losses incurred during the adaptation to the changing market.
Enhanced Strategy Update Completed
Anomaly analysis completed and strategy direction restructured, applied on 29 October 2023, at 00:00(SGT)
Establishment of new mechanisms for stable operations
Enhancements and additions of strategies to respond to various market events
Unpredictable market movements that make long-term and stable statistical analysis impossible for quantitative trading have increased.
Quantitative trading fundamentally relies on maximizing the use of the law of large numbers by analyzing as many targets as possible. However, this year has seen a rapid increase in abnormal movements, such as market manipulation.
As stories of people profiting from market manipulation under low trading volumes and extremely low volatility have become widespread, this abnormal trend also has spread rapidly.
The table below illustrates this in more detail.
The horizontal axis represents the Coinmarketcap's market capitalization ranking of the coins, the vertical axis represents time, and the green lines represent changes in the ranking.
Starting from the end of 2022, noticeable changes in ranking, which were previously unseen, began to appear, and the magnitude and scope of these changes have been rapidly increasing. Such changes pose a significant threat as they undermine backtesting assumptions that rely on a consistent or similar distribution.
In a market where coins that experience rapid rises and falls repeatedly dominate most of the trading volume, it becomes challenging to make predictions based on the distribution caused by the increasing number of abnormal individual issues and price volatility is also increasing.
As a result, it was difficult to update our strategy using long-term and stable statistical analysis.
Losses were incurred during the process of adapting to the changing market.
Beyond the reduction in overall market trading volume and volatility, the overall interest in the crypto market has decreased.
As explained earlier, the market has transformed into an environment where coins that rapidly move based on momentary issues or interest receive attention regardless of overall market movements, and losses have also occurred as we explored new approaches and conducted updates aside from our previous strengths.
Due to the characteristics of the strategy which manages a large trading volume and pursues stability, there had been certain limitations in strategies and responses, and both time and costs were inevitable during the validation process.
It was a process of diversifying the strategy for service updates, but we are taking the accumulated losses with seriously.
The strategy update was completed on 29 October 2023, at 0:00(SGT).
Under such circumstances, we put in a lot of effort, but we feel a great responsibility for not delivering the expected returns.
We are reconfiguring our philosophy, knowledge, and strengths to provide the best possible results in the new environment.
Meaningful results were obtained in the analysis of these phenomena, and the strategy's direction was restructured and incorporated.
We identified the shortcomings in our strategy assumptions and established strategy solutions and directions for situations that deviate from the original assumptions.
In response to the current market environment, we have changed our approach to select a list of investable assets based on "top-tier" market capitalization and trading volume. We believe that moving in this direction, even if it means giving up some advantages of the "law of large numbers," is reasonable because of the large size of these assets, which can prevent abnormal activities like market manipulation.
Stability remains important.
We have identified points where the existing safety mechanisms are powerless due to market changes. To address this, we have built more robust safety measures by combining not only data-driven methodologies but also expertise from related fields such as crypto events, finance, and macroeconomics theories and analysis.
Alpha still adheres to a market-neutral strategy, but the risk hedging and target direction have changed over the past six months. We have also supplemented and added strategies to respond more flexibly and proactively to various events.
Since the end of last year, the crypto market has been a challenging environment not only for most investors but also for quantitative traders.
In a time when some of the quant trading houses are facing significant losses or folding, our team has been focusing on stable defense.
Nevertheless, if we have not been able to satisfy our clients who have trusted us and entrusted their valuable assets to us, we deserve to accept the criticism humbly.
What we are focused on is the long-term and stable generation of profit. Recent research has shown promising results in the same context, and we will continue to study the market and provide consistent upward strategies.
Through this update, many aspects will improve, and we promise to continue putting in even more effort to achieve positive results.
We want to express our gratitude once again to the clients who have placed their trust in Heybit.
For further assistance or inquiries, 💡 Contact Our Support Team >
ⓒ Uprise Global, Inc.