How does the ETH 20 Day Moving Average Crossover Set work?
The ETH 20 Day Moving Average Crossover Set implements a crossover strategy on the ETH 20 day simple moving average indicator. Learn more about moving averages and crossovers here.
On a high level, ETH20SMACO automatically triggers rebalances when the price of ETH crosses the 20 Day Simple Moving Average (20 SMA) indicating a trend reversal. See the chart below:
Why use the 20 Day Simple Moving Average?
The 20 Day Simple Moving Average (20 SMA) is one of the most popular trading indicators to determine when to enter and exit positions in the short term. In contrast to the 50 Day SMA and other longer moving averages, the 20 SMA tracks shorter term trends, which results in more signals being generated.
How does the Set perform?
Disclaimer: The content below is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. The content below is provided for educational purposes only, and not indicative of future performance. None of the following should be interpreted as investment advice. The tools used below follow a predefined set of parameters and aren’t actively managed by Set Labs Inc.
View a backtest model of ETH20SMACO Set here. Edited: July 23, 2019. We've made an update to the model to more accurately determine daily simple moving average. The numbers have been updated to reflect this new calculation.
This chart below compares the hypothetical performance of holding the ETH20SMACO Set against holding ETH over the last 2 years, assuming a slippage rate of 1% during each rebalance. The model shows ETH20SMACO would have outperformed over the given historical time period and underperformed in choppy trading conditions and long bull markets (late 2017 - early 2018).
The chart below illustrates the ETH that would have been accumulated using the ETH20SMACO Set following the same assumptions above.
It’s important to keep in mind the the charts above are based on a number of assumptions and are only meant for illustrative purposes. As always, past performance is not indicative of future performance.
These charts use generated ETH hourly data sourced from Gemini. In production, the ETH20SMACO Set rebalances based on MakerDAO’s ETH price feed, which may output different results. If you’d like to play around with the data yourself (and tweak the parameters), feel free to fork the spreadsheet here.
In what markets do the ETH20SMACO typically outperform and underperform?ETH20SMACO typically outperforms in strong shorter term directional markets (bear or bull), and typically underperforms in choppy markets as moving averages are lagging indicators.
How is the 20 SMA calculated on TokenSets?
The 20 SMA indicator is calculated by averaging the on-chain MakerDAO ETH price for the past 20 days at approximately 3:00 am UTC each day. Link to technical documentation of the SMA oracle here.
What are the additional criteria needed to trigger a rebalance?
The rebalance criteria includes a minimum interval of 96 hours between rebalances and a confirmation period after the initial price-indicator crossover to reduce false positive signals. If the signal at the time of the initial crossover (e.g. price > moving average) matches the signal after 6 hours, then the Set will kickoff a rebalance. If the signal fails to match the signal after 12 hours, then the rebalance expires and another price-indicator crossover must occur.
How long does the rebalance take to complete?
Rebalances for the ETH20SMACO take approximately 2 hours to complete. Price drift is on average <1% over the course of 2 hours based on historical MakerDAO ETH price data. Learn more about Set rebalances here and our TWAP Rebalancing feature here.
View the ETH 20 Day Moving Average Crossover Set.