Background
Genesis Vision currently provides some useful tools and services to help platform users assess the performance of individual programs and funds. However there currently are few tools or services available that help platform users make informed assessments about programs, funds, managers and the platform at a higher level.
Given the impressive development history of the GV platform so far, there is good reason to have confidence that this situation will improve with time. In the meantime, there is opportunity for independent initiatives to contribute to improving this aspect of the platform with regard to tools and services that assist platform users in their engagement with GV programs, funds, managers and investors.
One of the earliest and best examples of such independent initiatives is the GVT Progress Bot: https://twitter.com/gvtprogressbot/. This bot provides daily updates of aggregated platform data that helps assess the adoption of the platform and the performance of its top managers.
More independent initiatives such as these are needed to help improve the platform experience for all users and increase adoption. The Genesis Vision Benchmark Indices (GVBIX) are an attempt to contribute in this space.
The Genesis Vision Benchmark Index (GVBIX) series
Simply put, GVBIX aims to be a family of investment programs that broadly follow overall market trading activity.
The GVBIX series of programs are an independent initiative to help provide a simple, useful and accessible way to assess the performance of managers and programs across the platform. It aims to serve as the benchmark for GV programs by following trading volume, based on the thesis that volume precedes price action. It also aims to provide investors with an option to gain exposure to the cryptocurrency market via a passive, cost effective and market-driven strategy.
GVBIX programs are based on a volume-weighted index allocation. They allocate assets based on trailing weighted average exchange volume; either of a set of assets in the global market, or for all trading pairs of a particular currency in a specific market(s). They re-balance based on the principle of threshold reallocation, where positions are only adjusted once they exceed a certain threshold beyond the initial allocation weighting. The result is an index whose price performance broadly correlates with the relative trading exchange volumes of certain trading pairs, or of assets denominated in a certain currency, providing some allowance for asset price volatility without incurring excessive expenses in the form of trading fees. The particulars will be determined on a program-by-program basis.
As a market-driven strategy as opposed to a manager-driven strategy, this allows GV platform users to assess individual GV trading programs of a given base currency against the relevant GVBIX and assess whether a certain program or manager consistently outperforms the market or not. Successful trading programs are by definition those that beat the return of the broader market after fees are considered. Therefore, the GVBIX series is intended to contribute with regard to its ‘benchmarking’ function as a simple tool by which the value proposition of individual crypto programs and managers may be assessed against one another, and against relevant indices, on a broader and more objective basis.
This initiative is by no means perfect or final. The GVBIX series are in the end just another set of investment programs designed with the intent of reaping profits, and ought not to be treated as highly precise, tightly controlled, and purely neutral scientific metrics. At best, GVBIX programs only offer an approximation of the market; the parameters, inputs and outputs that define each index are only to be applied in what could be described as ‘broad-brush strokes’. Simply put, the GVBIX indices will not be as scientific as they could be with the right tools, manpower and technical support; and they do not necessarily aspire to be so. They aim simply to be ‘good enough’ for the typical investor and/or manager, not for the data scientist or market researcher. That being said, the method and particulars of GVBIX indices stand to be refined over time, which will affect the consistency and accuracy of the results. Furthermore this initiative may be superseded by superior tools and services in the course of time. Indeed, this would be most welcome to see, as it would demonstrate that the platform is evolving and improving. In the meantime, it is hoped that the GVBIX family of indices will be received as a positive contribution to the GV ecosystem at this early stage of the platform’s life cycle, and a profitable long-term venture for those who choose to invest in the indices and support this benchmarking project.
Some GVBIX technical details
The GVBIX series will aim to cover all the base currencies that the GV platform allows programs to be created in. The intent is to help platform users be able to make comparisons easily across programs within each base currency.
With regard to the number of trailing days to be selected, the intent is to minimise the effects of outliers such as short-term high-volume pump-and-dump events, flash crashes and other such inorganic volume-related factors. It also ideally should be able to smooth out the effects of medium-term market cycles e.g. the 60-day BTC cycle (see https://www.tradingview.com/chart/BTCUSD/PtOh8dev-Bitcoin-Next-60-day-Cycle-BTC/).
As a general rule, GVBIX’s will aim for a coverage of at least 70% of total volume for a given market, with the aim of improving coverage over time. This is more relevant for BTC and ETH-based indices. USD and USDT-based indices will tend to have a coverage of 80% or better. For reference, the S&P 500 has roughly 80% coverage of the total US equities market in terms of market capitalization. The accuracy of GVBIX’s should improve as more capital is contributed into them. Practical matters that may influence the exact coverage may include the liquidity of a trading pair (relevant for BTC and ETH-based indices), the amount of investment capital available, and the minimum order sizes offered by the broker.
The initial series of indices proposed (in order of priority) are:
| # | Index | Link | Planned Initial coverage |
|---|---|---|---|
| 1 | GVBIX Blue-Chip Crypto Global Volume | https://genesis.vision/investor/programs/jlp5 | ≈80% of global volume excl. stablecoins |
| 2 | GVBIX Major Altcoins Global Volume | https://genesis.vision/investor/programs/jlp7 | ≈80% of global alt volume excl. stablecoins |
| 3 | GVBIX USDT Base-Pairs Global Markets Volume | https://genesis.vision/investor/programs/jlp8 | ≈95% of USDT base-pair volume |
| 4 | GVBIX BTC Base-Pairs Selected Markets Volume | [TBA] | ≈70% of BTC base-pair volume |
| 5 | GVBIX ETH Base-Pairs Selected Markets Volume | [TBA] | ≈70% of ETH base-pair volume |
From a practical perspective the global USD-denominated and USDT-denominated markets are simpler markets to construct an effective index for, with fewer significant trading pairs to consider and more consistent trading patterns to model. Indices #1 & 2 would be based on $USD-denominated global volume, while index #3 would be based on USDT base-pair volume. By comparison, indices 4 & 5 feature markets that have a much greater variety of trading pairs. Furthermore, volume trading is uneven, diffuse and extremely volatile across the pairs in the BTC and ETH markets, making an index relatively more difficult to construct and manage.
GVBIX has a key dependency upon the completeness and accuracy of data from CoinPaprika and CoinMarketCap. Where these providers flag trading pair data as being suspect, these will be removed from the underlying dataset. Otherwise no further judgments are made with regard to the accuracy and completeness of the data. They are accepted as-is.
GVBIX is based on the trailing average volume for a given number of days. The number of days will be a judgement call based on observations about the base currency and the associated market behaviour of all its trading pairs for that base currency and its given market.
Where a daily data feed is needed to build the underlying dataset used to construct an index, the aim is to extract that data at approximately the same time each day. There will be some variability with regard to the timing of the data extraction, but its impact on allocation should be negligible given enough data points.
Volume data is filtered to only include spot markets and percentage-based fee trading exchanges to help mitigate issues with inflated volume data (transaction-based fee trading exchanges tend skew the data with inorganic market-maker volume, and derivatives exchanges do not trade the underlying currency).
The criteria for rebalancing of individual indices will be done on a case-by-case basis, following the principle of threshold reallocation - whereby rebalancing will only occur if an asset has moved a certain % outside of its allotted allocation. This is done to minimise brokerage fees and allow for some flexibility in price action given the high volatility of crypto prices and volumes. The initial expectation is that rebalancing will be performed at least as often as once per the number of trailing days used to calculate the weighted average volume. As the project matures, this expectation will be revisited.
GVBIX Blue-Chip Crypto Global Volume, GVBIX Major Altcoins Crypto Global Volume and GVBIX USDT Global Volume shall draw data from all exchanges. Regarding the Blue-Chip and Altcoin indices, trailing monthly global volume data shall be used as denominated in $USD. Regarding the USDT Global Volume index, USDT represents a major source of liquidity across exchanges, with trading volume patterns having a generally uniform distribution across those exchanges.
GVBIX BTC Selected Markets Volume and GVBIX ETH Selected Markets Volume shall draw data from markets that the Genesis Markets broker interacts with for alt coin trading. At the time of writing, these are Binance and Huobi Global. These two exchanges are leaders in the alt coin trading space in terms of user adoption and transaction volumes. Altcoin trading volume patterns are very uneven across exchanges since altcoin offerings are unevenly distributed across exchanges, and therefore it would be inappropriate to apply a global dataset in the GV context. Since the purpose of GVBIX is to serve as a comparison tool for GV platform users, the scope of these indices are limited to the markets available to be traded by GV managers.
Thanks for reading.
JL
This blog is not financial advice. This is an independent blog. Please do your own research. You are responsible for your own investment decisions. The views and opinions expressed in this article are those of the author(s), and do not necessarily reflect the views and opinions of Genesis Vision or its affiliates.
