Ticker: CRYPTOTRND

Thesis: Bitcoin is the first and preeminent cryptocurrency. Recently, stock market participants have gained the opportunity to invest in bitcoin through Exchange-Traded Funds (ETFs) that track its value.

Despite its historically high returns, bitcoin's pronounced volatility and significant drawdowns deter many investors. This portfolio employs a trend-following strategy aimed at gaining bitcoin exposure with reduced risk, by maintaining bitcoin holdings during upward market trends and reallocating to more secure assets amid downward trends.

Portfolio construction: This portfolio invests in a combination of a bitcoin-tracking ETF, such as FBTC, and an ETF tracking US treasury bills, such as BIL. We use a proprietary algorithm to estimate the strength and direction of bitcoin’s trend. The portfolio holds high bitcoin weights when the algorithm indicates a robust positive trend. Conversely, an estimate of a negative trend causes a tilt toward safe assets.

This portfolio is long-only. It will never short bitcoin even when our algorithm estimates that its trend is negative. In historical backtesting, spanning from October 2015 to January 2024, we find that the portfolio’s average Bitcoin exposure would have been 58%.

Risks: This portfolio maintains exposure to bitcoin, a volatile asset which has historically had very high and prolonged drawdowns. While historical data suggests that trend-following strategies would have mitigated these declines, there is no guarantee that they will do so in the future. Trend following strategies are also at particular risk of underperformance around market reversals. Bitcoin is not backed by traditional financial assets.

Bitcoin ETFs are new to the market and we cannot guarantee that they will track bitcoin properly.

This portfolio may be traded partly or completely algorithmically and as such there is a risk of hardware breakages, software “bugs”, service outages, or other issues that may affect trading. DASTA Investments may update or modify the algorithm used to produce this portfolio.