Hybrid Intelligence Generates Annual Return of 166% in Bitcoin

Cindicator
Jun 7, 2018 · 7 min read

Today it is more challenging than ever to generate consistent alpha by self-selecting cryptocurrencies — Cindicator’s Hybrid Intelligence is a predictive analytical technology which provides today’s crypto traders and investors with a priceless edge.

Cindicator’s Hybrid Intelligence combines collective forecasts from over 105,000+ analysts, 5,000+ traders and AI. Over a period of eight weeks, an experiment was conducted where 45 traders executed 1,170 trades based on Cindicator’s Hybrid Intelligence Indicators. On average, the traders generated a return of 21.53% in BTC or 21.54% in USD in eight weeks. The traders outperformed the HOLD 10 Private Index Fund, the common crypto benchmark, which was up 12.97% in USD over the same period. Together, the 45 traders achieved a cumulative return of 16.26% over the period, or a 166% annualised return in Bitcoin, i.e. 2.66x. Within six months of the launch of Cindicator’s analytical product, the experiment validated Hybrid Intelligence as a profitable tool for trading and investing in the highly volatile crypto markets.

Contest rules

Traders were invited to a private Telegram chat, where they could freely communicate with each other, discussing different approaches and strategies. They could choose any strategy as long as their trades were based on Hybrid Intelligence indicators.

Cindicator’s indicators

Over 20 machine learning models then aimed to isolate systematic biases by assigning different weightings to answers, taking into account analysts’ past performance and other data. Finally, a neural network identifies non-linear relationships between different models. The resulting indicators show the probability of different events, for example whether a specific asset will reach a certain price by a given date. Since Q1 2017, indicators have achieved an average accuracy of over 60% and it continues to improve as the neural network learns from additional data.

Trading strategies

Some traded based on indicators with a high likelihood.

“What I did first was to start with 100% ETH stack, on general principles, then trade 10% of my stack to a long position whenever any indicator was above 65%,” said one of the top 10 traders.

Others preferred more nuanced indicators.

“On indicators, I should avoid high percentages: they mean everybody is seeing a big green candle… I prefer seeing the potential in the future than in the past. I’m more interested by indicators between 50 and 65%, if possible with a goal above 10%.”

One of the top traders, Vyom Mahadevia, decided to join the Cindicator team after the experiment, so we asked him about his strategies.

“My trading strategy is based on wave theory which is loosely based on the mass psychology of traders depicted through charts. Cindicator’s indicators are a perfect compliment to this style of trading (or any style of trading actually) as you get direct access to the psychology and sentiments of market participants. You can gauge the sentiments of the entire market based on the indicators provided by them,” he said.

However, the indicators could be used by themselves, without any technical analysis, Vyom explained. And indicators could also be used to find new ideas.

“Their internal team of analysts does a really good job in finding the right opportunities and catching the pulse of the market,” he added.

As an early supporter and token holder, Vyom was already contributing to the ecosystem, but the experiment finally tipped the scales in favour of joining the team.

“Being a trader in traditional as well as cryptocurrency markets, once Cindicator’s Hybrid Intelligence came out and showed promise, my mind was racing with possibilities. I felt really invested and engaged with their vision and the project and I wanted to do more to help.”

Findings show top traders made +66% in BTC in eight weeks

The return was measured in Bitcoin, which means that it’s isolated from fiat/crypto exchange rate fluctuations. These results were generated during a time of significant volatility but with no prevailing market trend. On 19 March, the first day of the experiment, Bitcoin was trading on Bitfinex in the range of $8,085–8,717 and on the last day, 13 May, it was trading between $8,318–8,760. Theoretically, strategies based on indicators would work in any market.

On average traders generated a simplified alpha of 8.57% in USD over eight weeks. This is calculated by subtracting the 12.97% return of the HOLD 10 index from the total average return of 21.54% in USD generated by the traders. The HOLD 10 is used as benchmark since it’s a basket of the largest crypto assets, priced in USD, weighted by five-year diluted market capitalisation and rebalanced monthly.

Here is how Cindicator Co-founder and CTO Yuri Lobyntsev commented:

“These results are phenomenal. We already knew that our technology was delivering a high accuracy. Now our token holders have also figured out how to apply indicators in their trading to increase profits. Yet this is only the beginning — we have over 5,000 traders in our ecosystem and we’re going to make more experiments to spread the knowledge between them. The value everybody is extracting from Collective Intelligence will rise significantly when these insights are further verified, refined, codified and available for all of the contributors to the ecosystem.”

Key outcomes and insights

“We see how the ecosystem gives rise to the newest form of hybrid approach to collective market analysis and decentralised capital allocation. This has enormous potential for disrupting the asset management industry in the new economy. We now plan to test indicators with a group of collective microfunds. We’ll select teams of traders and each group will jointly manage assets that we’ll allocate to them. This is a whole new paradigm in asset management where we blur the boundaries between technologists, clients, and traders,” said Yuri Lobyntsev, Cindicator Co-founder and CTO.

“With this second stage of our experiment, we’re essentially modeling a new format of a decentralised investment fund that in future could successfully compete with traditional funds. In this new format, diverse individuals with different unique professional skills are united in a decentralised structure for effective asset management. Their unique intellectual skills are utilised with maximum efficiency without any centralised oversight. In the long-term, this structure could not only deliver a superior return, but could also have a decentralised model that is more resilient to various risks and changing market conditions, such as financial crises and artificial bubbles,” added Mike Brusov, Cindicator Co-founder and CEO.

Experiments in traditional markets

In early 2017, Cindicator carried out a pilot study with the Moscow Exchange during which 863 participants made forecasts for futures contracts for USD/RUB, oil, gold, and silver. It’s noteworthy that 40% of participants had no prior trading experience. Based on collective forecasts, Cindicator’s robot modeled 27 trades, generating 47% return per annum. That experiment attracted significant attention from professional and institutional investors.

Future development

Today we are witnessing the birth of a new entity in the world of investments and distributed autonomous organisations — a symbiotic decentralised hybrid investment fund. It’s inspiring that our team and active community are right at the heart of these tectonic shifts.

Everything we post and release is for analytical and educational purposes only. Futures, options, equity, and cryptocurrency trading involves the risk of loss. Any opinions, news, indicators, products, and other information contained in our website and platform is provided as general market commentary/analysis and does not constitute investment advice or a recommendation to buy or sell any type of security, futures contract, cryptocurrency, or foreign exchange contract.

All investments involve risk, and the past performance of a security or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.

Third-party information provided for Cindicator Bot from crypto exchanges is meant for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information provided is not warranted as to completeness or accuracy and is subject to change without notice.

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Cindicator

Cindicator is a fintech company that enables effective asset management through predictive analytics based on Hybrid Intelligence. Here we share our news & views on token economy, smart money, Black Swans, data analysis, AI, Machine Learning, and other topics.

Cindicator

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Hybrid Intelligence for Effective Asset Management https://cindicator.com

Cindicator

Cindicator is a fintech company that enables effective asset management through predictive analytics based on Hybrid Intelligence. Here we share our news & views on token economy, smart money, Black Swans, data analysis, AI, Machine Learning, and other topics.

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