Market Neutral

[john0490]

There have been much discussions regards bitoin trading, but mostly they are focusing on long only strategies. That might work for certain periods (especially in secular uptrends) but if one has made detailed analysis of bitcoin (or any other cryptocurrency) price history, then you will notice that there have been several prolonged periods with downtrends.

Question is. Has someone made market neutral strategy with one or several cryptocurrencies that reduces exposure to sharp downtrends? 

[1715043284]

1715043284

[btcone111]

There have been much discussions regards bitoin trading, but mostly they are focusing on long only strategies. That might work for certain periods (especially in secular uptrends) but if one has made detailed analysis of bitcoin (or any other cryptocurrency) price history, then you will notice that there have been several prolonged periods with downtrends.

Question is. Has someone made market neutral strategy with one or several cryptocurrencies that reduces exposure to sharp downtrends? 

I think all coins are fairly strongly positively correlated.... I don't think it's possible to achieve a market neutral strategy...
But enlighten me, maybe I'm wrong!

[john0490]

Hi

It is difficult to answer about correlation. Problem is that cryptocurrencies are only few years old (at best) so there simply isnt enough data to determine that. And obviously past indication says nothing about future.
Historically there definitely is some correlation but in last months price direction has started to diverge. No one knows if that is short term development or major pattern.
BTW if you look mayor crypto currencies against another currencies (not only USD) picture changes even more.

I think the best way to make market netural stategies in crypto currencies isnt via divesification (make portfolio with netural or negative correlation) but via hedging. I hope CME will do good job and BTC futures will be liquid and that would pave way to many hedging and short selling strategies that would considerably improve trading and investing process. Plus this probably will be the reason that would bring institutional money into crypto currencies (most hedge funds dont open naked positions) and that would meen additional liquidity.