How to choose which Crypto Strategy to follow?



How to choose which Crypto Strategy to follow?

There are graphs and a lot of numbers on the platform with many Crypto Strategies. If you don’t know what to look for, it’s easy to feel overwhelmed. The most important things to consider are the same things that people look for in traditional finance Net Returns and Risk. Any endeavor of investing over the long term needs an ability to analyze performance and draw the right conclusions. The obvious questions that need to be addressed. The result—how well did your investment decisions fare? The result can be described in a few different ways. First, how much money did you gain or lose? Second, as a percentage of the amount invested, or absolute return. Third, as a percentage after adjusting for time invested. This measure is usually called annualized return. Fourth, as a comparison to a benchmark.

Gross – Net Returns

Returns are important since they show you the past performance of a Crypto Strategy. Although past performance is not a guarantee for future performance, this can be a useful indicator since it can give you a good idea of a strategy’s performance compared to other ones. Iconomi shows gross returns on strategies. Table 1 below shows the top five strategies and benchmark index by gross return. It is important to know that investors do not get these returns.

Table 1 – Top 5 strategies by gross return

Table 2 shows the Top 5 strategies by assets copying.

Table 2 – Top 5 assets copying strategies

Strategies charge various management fees, performance fees that appear to reduce the total or net return to investors. Otherwise, the logic is not simple; the greater the gross return, the better! For instance, You selected the strategy you had wanted to follow, remain vigilant, and monitor your portfolio closely. After one year, you noticed that return of your portfolio is much lower than the readings of returns on Iconomi for the strategy you follow.

Net strategy returns

Only net returns are important for followers because net returns increase their wealth. The publication of gross return is just a marketing show of managers to attract followers. Gross returns often mislead to wrong decisions. It is possible that the fruits do not show up more generally in net strategy returns because they are absorbed by expenses. The tests for net strategy returns ask whether active managers have sufficient skill to cover all their costs. Specifically, whether managers have enough skill to cover the costs of performance fees missing from expense ratios. Last but not least, make sure to check the fee structure of the strategy, so you will know how much you will be paying the Manager for their work. When it comes to the fees, let us also point out the “Performance fee.”

Fee structure – Performance fee costs

In other words, we examined strategy-by-strategy performance to determine performance fee costs, which investors must consider. The range of outcomes is wider than expected. According to the performance fee structure, some strategies charge monthly, some charge weekly, and the rest of the strategies do not charge a performance fee.

The table above shows 13 crypto strategies on the Iconomi platform, their Performance Fee structures, Performance fee costs in one year, gross return, and investors’ crucial factor, Net Returns. Investors must understand:

  • Since the platform itself does not publish net returns, we had to calculate them from the data we obtained through the API
  • Performance fee significantly changes the order of performance of strategies (the second most successful strategy in terms of gross return (1352%) is significantly worse for the investor and is in fifth place, as it has only 742% net return.
  • Weekly or monthly fee has the compound effect, which causes that investor Performance costs are much higher than expected. For instance (FutureProof), Investors might think they would pay 20%, but the costs at the end of the year were 42.03%.
We hope this gives you a better understanding of what to look for when picking a Crypto Strategy to follow for your investment.

 



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