Scribd
Upload
48 views

Modernized Crypto Assets: Reducing Volatility To Produce An ETF Style Commodity For Crypto

The document discusses creating a modernized crypto asset that reduces volatility to function like an ETF for cryptocurrencies. It aims to bundle crypto assets in a way that smooths out price movements, unlike existing bundles that are highly correlated. The project would use automated money management to intelligently move funds between USD and crypto currencies based on predictive algorithms, working for major currencies. It presents the problem of cryptocurrency volatility and lack of index-style funds before detailing the proposed solution.

Uploaded by

bc500
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
48 views

Modernized Crypto Assets: Reducing Volatility To Produce An ETF Style Commodity For Crypto

The document discusses creating a modernized crypto asset that reduces volatility to function like an ETF for cryptocurrencies. It aims to bundle crypto assets in a way that smooths out price movements, unlike existing bundles that are highly correlated. The project would use automated money management to intelligently move funds between USD and crypto currencies based on predictive algorithms, working for major currencies. It presents the problem of cryptocurrency volatility and lack of index-style funds before detailing the proposed solution.

Uploaded by

bc500
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 50

Modernized Crypto Assets

Reducing Volatility to Produce an ETF Style Commodity for Crypto


Quick Refresher
● Problem
● Project
Problem - Refresher

• Crypto is massively volatile


• No crypto asset w. smooth index effect*
• Bundles are too highly correlated
• Contain undesirable assets
S&P 500 Chart. Unlike stocks no crypto asset exists which
smoothly tracks the movement of the market.
Project - Refresher

USD • Automated money management for crypto


• Intelligently moves $ between USD & crypto
62% • Works for all major currencies
• Money moves based upon prediction algorithms
BTC
Presentation Structure
● Data
● Sentiment
● RNN Training
● RNN Analyzing
● RNN Trading
Data Exploration -> Bitcoin
Data Exploration -> Bitcoin
Bitcoin -> Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
Bitcoin -> Weekly Z-score Return Distribution
NLU + Sentiment
• Hypothesis
• Public sentiment drives market prices
for crypto assets
• Data
• Reddit
• Methods
• Off the shelf sentiment classifiers
(NLTK+TextBlob)
• SocialSent
NLU Data
● Too much data
○ All comments on cryptocurrency related
subreddits ever
○ Narrowed to r/btc and r/Bitcoin
● Comment Text
● Timestamp
● Score (Upvotes/Downvotes)
● Author
● Metadata
NLU Methods
● Off the shelf sentiment classifiers
○ NLTK
○ TextBlob
○ Poor performance
● SocialSent: Inducing Domain-Specific
Lexicons from Unlabeled Corpora
○ William L. Hamilton
○ Kevin Clark
○ Jure Leskovec
○ Dan Jurafsky
SocialSent
1. Co-Occurrence VSM
a. Vocab 5000 most frequent words
b. Automatically includes seed words
2. PPMI
3. SVD (Singular Value Decomposition)
a. dimensions = 300
4. Turn the VSM into a Graph
SocialSent
1. Propagate sentiment from seed words
in the graph
2. Use random walk to obtain positive and
negative polarity scores
3. Weight those scores to obtain final
polarity
Price 1 hour after 25 sigma event using weekly moving z-score
NLU Further Work
● Use of sentiment time series as feature in broader RNN
● Lower hanging fruit -> current methods are complex and rely on assumptions
● Time
○ Tuning hyperparameters, exploring data further
● Using a densifier training method for subreddits with 100B+ tokens of data
● Entity recognition and resolution
○ “How often is Bitcoin mentioned?”
○ “Are BCH, BTC, BCHABC, and BSV different things?”
Training
Training Phase 1
• Didn’t give enough time per model
• Some early helpful results
• Training on BTC 120 minutes
Training Phase 2
• Identified some key hyperparameters
• More training necessary
Training Phase 3
Model Results - multiple time periods
Coin Pred Minutes Real Train Acc. Alpha Train Acc. Real Test Acc. Alpha Test Acc.

BTC 120 65.26% 56.24% 57.87% 50.32%

BTC 120 58.22% 54.39% 54.15% 51.45%

LTC 120 59.81% 55.24% 53.27% 50.88%

LTC 5 58.32% 53.25% 54.02% 51.80%

LTC 5 68.42% 60.25% 62.77% 54.59%


Focus On LTC-5min
Coin Pred Minutes Real Train Acc. Alpha Train Acc. Real Test Acc. Alpha Test Acc.

BTC 120 65.26% 56.24% 57.87% 50.32%

BTC 120 58.22% 54.39% 54.15% 51.45%

LTC 120 59.81% 55.24% 53.27% 50.88%

LTC 5 58.32% 53.25% 54.02% 51.80%

LTC 5 68.42% 60.25% 62.77% 54.59%


Model Analysis - Sample Space Ω

Recall @ 0.50 Investment Thresh

Positive Recall: 62.12%


Negative Recall: 63.32%
Model Analysis - Event Space E⊆Ω

Recall @ 0.55 Investment Thresh

Positive Recall: 74.81%


Negative Recall: 70.01%
Model Analysis - Event Space E⊆Ω

Recall @ 0.60 Investment Thresh

Positive Recall: 80.81%


Negative Recall: 78.23%
Mar
ket
Market Results @ 25 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: -488.42% Return %: -58.99%
Sharpe: -19.90 Sharpe: -24.28
Market Results @ 10 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: -111.97% Return %: -4.50%
Sharpe: -05.05 Sharpe: -2.04
Market Results @ 05 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: 13.89% Return %: 13.65%
Sharpe: 0.639 Sharpe: 6.27
Best Entry
Market Results @ 04 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: 39.01% Return %: 17.27%
Sharpe: 1.79 Sharpe: 7.95
Theoreticals
Market Results @ 02 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: 89.24% Return %: 24.54%
Sharpe: 4.12 Sharpe: 11.31
Theoretical
Limit
Market Results @ 00 basis point cost per trade

Investment Threshold: 0.50 Investment Threshold: 0.60


Return %: 139.48% Return %: 31.80%
Sharpe: 6.44 Sharpe: 14.64
So What?
Problem Solved - Kinda
Problem Solved - Kinda
The End.

You might also like