Embrace yourself, because London-based financial services platform known as Marex has introduced a fresh, volatility-adjusted strategy tied to bitcoin (BTC), ether (ETH) and dollar index (DXY) futures, seemingly in an effort to mitigate potential turbulence from the episodic crypto market.
Now, you may wonder, what does this all mean? It’s simple. This strategy gives equal significance to both BTC and ETH, with DXY futures acting as a risk management mechanism. So, in the face of fluctuating volatility, this basket of assets swings responsively, reducing exposure to BTC and ETH when turbulence spikes, and increasing it when the market steadies itself.
This skilful balancing act capitalises on the DXY’s renowned stability during chaotic market periods and the somewhat risk-oriented nature of BTC and ETH. The result? A smooth, steadied portfolio performance, regardless of what’s happening in the wild west of crypto markets. According to Mark Arasaratnam, co-head of Digital Assets at Marex, this “is the first institutional grade FX and crypto vol targeted strategy.”
Critics, however, may argue that Marex’s manoeuvre could be seen as an evidence to lagging confidence in the cryptocurrency market. Sure, this scheme provides an appealing safety net for those looking to tiptoe into the crypto realms, but does it also underline the lurking perils and unpredictability of plunging too deep into those waters without a lifesaver?
Moreover, while many crypto aficionados claim BTC as a stable asset, historical data might bring a little doubt into that conversation. The most prominent digital currency somersaults with impressive rallies during sustained dips in the US dollar. In contrast, the US dollar, which serves as a key component in Marex’s new strategy, has consistently stood as the guardian against systematic uncertainty in both the crypto and traditional markets.
The DXY’s inclusion thus guarantees less volatility and lower potential losses, which only amplifies the appeal of this novel strategy even more. According to Marex’s own research, the hybrid strategy would have given a tidy 29% return from Jan. 1, 2021, to June 30, 2023 outscoring the traditional crypto buy-and-hold methods.
At face value, Marex’s strategic balancing act appears to be a clever move, offering a prescribed dose of digital asset exposure with a decent stability. But it also subtly questions the often unproven sanctity of BTC and ETH as investable assets in their own right. Matters of faith aside, one cannot dismiss the prospect of a future where strategies like Marex’s may become the blueprint for institutional crypto investing.
Source: Coindesk
