Strategy Closing - $FCA

Details

Affected Strategy: $FCA

$FCA's MDD exceeded twice the predefined strategy threshold on October 25, 2023. This led Silentist and Coinvestor to initiate a strategy review in compliance with platform policies. Upon evaluation, it was found that a strategy rebalancing was necessary to resolve the situation, leading to their decision to temporarily halt operations in order to protect customer assets from additional losses until the issue is resolved. 

Actions Taken

(1) Closed the trading for strategy $FCA.

(2) Deposited the remaining balance into investors' wallets on November 3, 2023

Comments from $FCA Operator

What was $FCA strategy?

$FCA is a Fully AI-Driven Long-Short Equity portfolio developed by Silentist.

1. $FCA is a 100% AI-Driven strategy.

2. The portfolio, built upon AI-identified factors, follows a familiar 100/100 Long-Short Equity strategy often found in stock funds. While this method can generate market-neutral alpha, irrespective of market trends, it might lag behind during exceptionally exuberant bull markets driven by irrational behavior.

What were the reasons for its failure?

1. Long-Short Equity was premature in the crypto market.

  1) Crypto market characteristics : Not many small-cap options. $FCA focused on crypto assets with a market cap of over $1 billion, giving us about 50 assets to work with. Expanding the portfolio to 20-30 assets is our limit, which means each position carries a risk of 10-20%, impacting the whole portfolio during wild price swings.

  2) Crypto market characteristics : Unlike traditional Long-Short Equity portfolios with a wide variety of assets and relatively stable fundamental data, the world of cryptocurrencies is a different beast. Getting reliable data can be quite a challenge, and it's not as easy to find high-quality information as it is in traditional markets.

2. Lack of statistical significance due to short sequence length.
This is the part we regret most as a quant operator. Overlooking the importance of statistical significance based on extensive data and trading records, especially in data-driven strategies.

3. Impatience as the biggest enemy of business and investment.
The fundamental problem was our team's impatience. The main product we operated for over a year is still fortunately breaking new highs at this moment. The impatience led us to quickly launch $FCA with minimal internal verification, leading to a rush to launch a strategy that required more validation.

Looking ahead

AI strategies have proven their effectiveness, and fundamental data remains significant. It's essential to give priority to statistical significance and stability, acknowledging the growing importance of quantitative data. We will aim for long-term alpha generation, maintain patience in the face of short-term market fluctuations, and emphasize straightforward and well-validated strategies while steering clear of intricate approaches. Keeping this vision in focus, we are committed to effectively operate the strategy in the future.

Note

Coinvestor is committed to consistently providing transparent and reliable information, making every effort to safeguard and support the interests of our investors.

If you have any questions regarding the strategy closure, please feel free to reach out to us at cs@coinvestor.co