Aug 17, 2018
Crypto Strategy: The Arbitrage of Time
Crypto is missing something. Not the flashy algorithms or pretentious marketing jargon. The cryptocurrency space is lacking the perception of time. The barbaric swings of the market are now just a spectacle. Pageantry for the clatter of bystanders. Twitter erupts as assets plunge or climb. Technical analysis of technologies has been reduced to hearsay and scrolling through a website put together by a marketing team.
In a world where time is money, the final frontier is time.
Time has been misplaced in the bustle. Forgetting that these moments will mature the market. There is no short cut. Innovation demands energy, exploration, and blunders. As breakthroughs are made, the industry inches forward. Neither flying nor running, we crawl. Iterating on each discovery. Although it appears there are times we backtrack, this is only through perception. Improvements continue moving us forward, whether or not the market follows.
Regarding Value
The value of the innovations in the cryptocurrency space is increasing. Regardless of the market movements, the technology is advancing. Bright minds are flocking to participate in these challenges. After all, intelligent people want to solve interesting problems. Crypto presents some of the most difficult problems in the world, so this is a logical industry to pursue.
Neither crypto nor ideas can be killed. Both are owned by all who participate.
Since the inception of Bitcoin, the crypto industry has never been worse off than the day before. Every day is a better day for crypto. Even hacks, failures, and scams have presented opportunities for us to grow. Producing more aggressive pursuits of security and innovation, we bear the burden of these mistakes. Yet, it liberates us. Redeeming us from our history, we progress.
There is no time better than the future.
Speculation is constantly swirling regarding the value of cryptocurrencies in the future. While nobody can tell you the value of an asset, we do know that the value of the achievements in the crypto space will be greater than they are today. We can be sure the infrastructure will be more robust, the innovations more momentous, and the versatility more compelling.
This transforms the focus from the value of assets to the value of the movement.
Regarding Time
Realizing what we know now presents a spectacular opportunity. The optimal strategy in crypto is one which corrects for time. Most strategies in the crypto space approach the market as one which will increase or decrease with uncertainty in the short-term. While this may be correct, these strategies don’t correct for how the market will behave in the long-term. Since the market will continue to mature and grow in the coming years, we can be certain this will cause long-term expansion. Therefore, we must construct a strategy that supports the long-term potential of the market.
Uncertainty of the short-term should not influence our certainty of the long-term.
Adoption cannot happen in an instant, neither can progress. They are built brick by brick. Imagine a house that is only partially complete. While this house may have no practical use at the time, it will eventually be completed. It just needs more time. Once complete, its value is far more than the sum of its parts. Like how an incomplete house cannot provide shelter from a storm, a deficient crypto market cannot lend support to the global financial system. This will develop in time.
Portfolio Rebalancing
Strategies that optimize for time are few. The most famous of these is portfolio rebalancing. A long-term strategy that targets future growth. Arbitraging time is as simple as set it and forget it with rebalancing. As the market throws down trends or up trends, rebalancing utilizes accumulation and dispersion to anticipate long-term growth.
At the completion of each time interval, rebalancing resets the allocations of a portfolio to match the original target. This process of buying and selling assets enforces the original footing for each asset during the next period. Allocations which performed well over the last period may not perform well again over the next period. In a similar light, although an asset performed poorly over one period, the general long-term trend is expected to be upward for the market.
You can learn more about rebalancing and the potential of this strategy in the following two articles.
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The Shrimpy Team
