Bulletin #4

ⓘ This bulletin was sent to Set subscribers on 2020/08/18. You can also read it on Medium. Give it some claps!

It’s been almost two months since the last edition of 100 Waves Bulletin was published and cryptomarkets present a very different picture now. Before I get to that, I’d like to share what I was doing during this time. In June I went for more than two weeks for vacations in Greece. Greece is an example of very good COVID handling, so it was able to open its borders to tourists pretty early. It was a fantastic holiday, with a lot of sunshine, great outdoors and unique opportunity to see some world famous places (Santorini eg.) almost crowd free. Then, in early August, I went for a long ride from Poland to the Netherlands and back. While it was more driving than sigthseeing, I managed to visit some nice parts of Germany on my way back and even taste some wine (I’m a wine freak a bit). Immediately after I’ve returned home, I had to assist one member of my family with serious health issues. This involved eg. staying at the hospital all night, and engaged me completely.

Why am I writing all this? Well, social sets, unlike robo sets, are run by human beings. And as a human being I cannot guarantee being always available. Sometimes I have to rest, sometimes there’s no internet, sometimes something unexpected happens. But even if I’m available, sometimes I’m relaxed after swimming in Mediterranean Sea, sometimes I’m rather depressed, seeing someone I deeply care about gravely ill. All this can affect trading decisions.

That’s why I’ve spent a lot of time, first, creating strict rules for my strategies, and then putting those rules into strategy code and automating the whole process. One of my strategies rebalanced itself while I was riding in the ambulance (with emergency lights, sirens etc).

Let’s go back to the crypto world. After long, painful, choppy range trading, ETH price went significantly up to where it’s now. All strategies caught this trend early. “We can be sure, however, that when price will break out (hopefully upwards!) for this range, the allocation will be appropriate, and we’ll ride the next wave” – I wrote in the last Bulletin, and that’s exactly what happened. Not only did the price almost double, but the movement was quite smooth and took some time, which is very important, as the strategies need some time to adjust the sell zone. What really matters is not the current price, but the price at which the strategy sells/buys. I was of course pleased to see the prices going up, but only after the sell zones moved up as well I felt strategies really will lock up some gains.

ETH/BTC Ratio strategy is a bit different story, since the price changed less and there was more choppiness on the way, so the strategy did quite a few rebalancings in and out of ETH, worrying that the trend could be reversing.

Not only ETH prices changed during summer months. Also transaction costs changed enormously. Two months ago, one had to pay $20 to start a rebalancing. Now, the costs can reach more than $200! The Token Set team agreed to reimburse those costs, but with numbers that high, something has to be done to lower it. I took some measures to reduce the number of rebalancings: I’ve introduced a minimum % threshold, below which a tranche would not rebalance, then I’ve reduced the number of rebalancings for all strategies. Few days ago, with gas prices skyrocketing, I had to make a hard decision to disable tranching completely. So as of now, there’s only one tranche, comprising all sub strategies trading (evenings European time).

It did it very reluctantly (as I put a lot of effort into researching and implementing tranching), but it was the only way to go. My strategies, even without tranching, tend to do a lot of rebalancings compared to other strategies. It could cost thousands of dollars per month, per strategy.

Please keep in mind that this doesn’t mean the strategies will underperform. All backtests shown here were done without tranching. Recently announced Token Sets v.2 promise lower transaction cost. Until then, unless gas prices drop substantially, strategies will rebalance once a day. I’ll happily switch tranching on again when it will be possible.