How does the ETH 50 Day Moving Average Crossover Set work?
The ETH 50 Day Moving Average Crossover Set implements a crossover strategy on the ETH 50 day simple moving average indicator. Learn more about moving averages and crossovers here.
On a high level, ETH50SMACO automatically triggers rebalances when the price of ETH crosses the 50 Day Simple Moving Average (50 SMA) indicating a trend reversal. See image below.
How is the ETH50SMACO different from ETH20SMACO?
In contrast to the ETH 20 Day Moving Average Crossover Set, the ETH50SMACO rebalances based on the longer term trend. This means rebalances are less frequent with the goal of filtering out short term price spikes and dips. Both ETH20SMACO and ETH50SMACO can be used in combination to diversify exposure to both long term and short term trend trading for ETH.
Why use the 50 Day Simple Moving Average?
The 50 Day Simple Moving Average (50 SMA) is one of the most popular technical indicators to determine when to enter and exit positions for medium to longer term traders.
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 model of the backtest here. This chart below compares the hypothetical performance of holding the ETH50SMACO Set against holding ETH over the last 3 years (August 20, 2016 to August 20, 2019), assuming a slippage rate of 1% each rebalance. The model shows ETH50SMACO would have outperformed over the given historical time period and bear markets, 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 ETH50SMACO 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.
The model uses generated ETH hourly data sourced from Gemini. In production, the ETH50SMACO 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 ETH50SMACO typically outperform and underperform?ETH50SMACO typically outperforms in strong longer term directional markets (bear or bull), and typically underperforms in choppy markets as moving averages are lagging indicators.
How is the 50 SMA calculated on TokenSets?
The 50 SMA indicator is calculated by averaging the on-chain MakerDAO ETH price for the past 50 days at approximately 7:05 pm 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 ETH50SMACO 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.
View the ETH 50 Day Moving Average Crossover Set.