✍️Interesting Crypto Autopilot Moves in April?
In this “altcoin season”, we had a little more coins qualify for inclusion, so Decentraland and Kusama (Polkadot’s “Canary” network) were added to the investable universe.
We expect to see May call for a lot of new inclusions too.
🙋 Your Questions on the Autopilot, Answered!
We love getting your questions, so keep them coming!
For those who recently joined us, in the past months we covered those questions: “How does the Autopilot Work?”, “How long should I stay in the Autopilot?”, “Why own crypto and when should I buy it?”, “Can we get better reporting for tax purposes?”, “How diversified is the Autopilot?”, “Why do I never see Ethereum in the list?”, “When is the best time to deposit?”, “Have you tweaked the algorithm recently?”, “What if you go Bankrupt?”. If you missed them, those answers are now all on our blog, just follow the links.
Here are this month's questions:
1. Ethereum is on a tear, and I still don’t see Ethereum in the Autopilot?
Ethereum is indeed on a tear. It started 2021 around 600€ and it is worth €2,629.56 at the time of writing.
As we explained in January, ETH is in the addressable universe, and it has been chosen a few times, but the correlation between the larger assets is much larger than the ones between smaller assets (and the ones between large and small assets). From a portfolio construction perspective, it does not make sense to include 2 instruments that exhibit highly correlated return characteristics, which comes down to buying more of the same (albeit with a different name). In other words, risk cannot be reduced by combining ETH and BTC.
In 2020, ETH and BTC have moved concurrently showing similar performances, with a correlation in returns of more than 64%, while the average correlation of altcoins with BTC is approximately 35%.
We expect that if the price of ETH keeps moving away from BTC’s, the Crypto Autopilot might in the future take a position in ETH. Right now, the ETH 30-day price correlation with BTC reached its lowest number in over two years.
The aim of portfolio construction is to achieve a better risk-adjusted performance by combining assets rather than concentration in the best-performing assets. Thus, it follows that there is nothing to be exploited in the joint behavior of the two largest assets from a portfolio construction perspective. For now.
2. Prices have been going up so much recently, I’m probably too late to crypto, am I not?
It’s for you to appreciate, but you might want to take a look at the long-term perspective to understand whether it is indeed too late.
Since 2013, the Total Market Capitalization of Crypto has gone from roughly €830M to €830B.