Our Portfolio Methodology

We built New Wave Capital to give you an intelligent way to easily invest in a portfolio of cryptocurrencies. You might wonder, why add crypto to my holdings in the first place?

Grayscale Investments found that adding a 5% allocation to cryptocurrencies to a Global 60/40 (equities and bonds) increased the cumulative return by 26.1%, without materially increasing volatility to improve risk-adjusted returns by 166%.

So let’s dive in.

Portfolio Allocation

We are taking a blended, measured, and risk-adjusted approach to capitalize on the wave of cryptocurrency. These projects are developed on public blockchains and traded on public exchanges, available to be reviewed and dissected in numerous ways. There’s some special sauce in our algorithm, but we utilize five primary factors to build your portfolio: Risk Tolerance, Market Cap, Trade Volume, Product Completeness, and Opt-Out.

Risk Tolerance

Our simple questionnaire helps to determine your understanding of cryptocurrencies and tolerance for volatility. For instance, users that are likely to sell upon a 20% dip are recommended large allocations of coins that have a relatively longer track record and higher stability such as Bitcoin. We realize that the questionnaire is not exact science, so we allow users to adjust their own tolerance by adjusting the slider at the bottom of their portfolio.

Market Cap

The market cap of each coin is a significant factor in our equation to determine each coin’s allocation percentage, because it helps users obtain a portfolio that is more resemblant of the overall crypto market. As coins gain or fall in popularity and acceptance, their weights update accordingly. We query each coin’s price, market cap, and trade volume every five minutes to get accurate data.

Trade Volume

Liquidity of each coin is a utilization signal, and we combine this metric with market cap to deliver an allocation percentage for each coin. While buying your portfolio, we’ll identify the most competitive pricing by routing trades across major exchanges.

Product Completion

Coins that are earlier in their product life cycle are generally more risky, and we carefully study the progress of each of our supported coins (and potential coins). We currently score each coin, with the lowest score being solely a whitepaper and the highest being a coin that has been live for several years with a significant developer and business ecosystem. We are thoughtful with selecting our portfolio coins and do not recommend recent ICOs that have no track record. Product Completion has an inverse relationship with Risk Tolerance: the more risk you choose to accept, the higher percentage of your portfolio is represented by newer coins.

Opt-Out

We give control to our users by allowing them to opt out of certain coins that they do not wish to hold. To do this, click on the coin, and a description box will pop up with an Opt Out button. Our program automatically distributes the opted out portion among the active coins in your portfolio.

Over time, we are fine-tuning our algorithms using more complex data sources + models, sentiment analysis, historical returns, and learned user preferences.

If you have any feedback, we’d love to hear from you. And if you’re not a client yet, sign up for an account at www.newwavecapital.com!