💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

After Alpha: How Can Traders Gain An Edge? Cyclical Systems Like This One Could Provide An Answer

Published 02/08/2022, 14:14
Updated 02/08/2022, 15:14
© Reuters.  After Alpha: How Can Traders Gain An Edge? Cyclical Systems Like This One Could Provide An Answer

Markets can be highly volatile, which is glaringly obvious in the world of cryptocurrency.

The crypto market and the individual assets that comprise it are subject to extreme swings in value. While this can make things difficult, it also theoretically creates opportunities for smart traders who are able to properly strategize on the direction of the market.

But even when investments grow, are traders leaving value on the table?

Most do everything in their power to maximize gains, and this means outperforming a market, hot or cold. If the whole market grows by 10% in a year, the goal is for investors to outperform that. This gap is called alpha and is the difference between a benchmark of the market as a whole and an individual portfolio.

Many investors or fund managers are famous for the alpha they provide, but not all are exactly consistent - Cathie Wood became a superstar after her fund Ark Innovation ETF (NASDAQ: ARKK) performed well above the broader market. As the markets turned, however, the fund was down significantly more than the market as a whole.

Berkshire Hathaway Inc . (NYSE:BRKa) (NYSE: BRK-A) CEO Warren Buffett is a great example of sustained alpha. He has outperformed the market, although perhaps more modestly, over his whole career.

As the crypto market makes wild swings, projects such as Seasonal Tokens may be interesting examples of other methodologies of gaining value. The project created its own internal market with which it hopes traders can continually achieve alpha.

Seasonal Tokens is made up of not one but four individual tokens — Summer (CRYPTO: SUMMER), Autumn (CRYPTO: AUTUMN), Winter (CRYPTO: WINTER) and Spring (CRYPTO: SPRING).

These tokens are designed to rise and fall in value relative to each other based on the mechanics the project has put in place that influence the relative supply and demand of each.

The supply is cyclically influenced by adjustments to the mining difficulties and farming rewards. At any given time one of the four will be the easiest to produce and least rewarding, and therefore, the market is incentivized to value it the least. At the same time, another token will be the hardest to produce and most valuable to farm, and the market may value it the highest.

After a time this will shift, reversing these factors. This theoretically presents an opportunity for traders to always be trading more valuable tokens into less, hopefully creating a system in which generating alpha is a consistently attainable endeavor.

If you are interested in learning more about the project, check out https://seasonaltokens.org/.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

Featured photo by Viktor Forgacs on Unsplash

© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Read the original article on Benzinga

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.