Adam Haeems— Set Social Trader AMA Series
This is a transcript of a recent AMA that was held between Adam Haeems and the Set community in our Discord channel. The AMA was held on the 18th of March at 1:00PM PDT, 2020.
You can check out Adam’s Sets here.
If you want to be involved in future AMA’s, be sure to join our Discord channel.
Inje: Hello everyone! Let’s get started!
Let’s give a warm welcome to Adam Haeems, creator of the ETH Trending Alpha LT Set and ETH Trending Alpha ST Set.
As a reminder for everyone participating — please keep the discussion respectful at all times.
Could you start off by giving us a brief intro on your background and how your Trending Alpha Set’s work? Then we’ll get started with questions.
Adam: Hello everyone! Great to be here. As some of your know, I’m currently the CEO of Alphachain Capital and also run a trading academy across FX and Cryptocurrency markets. I come from the traditional finance world having traded fixed income futures for Bank of America Merrill Lynch before moving to become a Futures Trader for a global macro hedge fund, trading across 120 futures markets.
The hedge fund I previously worked out of I was known as a CTA, they predominantly develop trend-following models across equity indices, fixed income, metals, oil, soft, grains and meats. It is some of the methodology I learned there that I bring to crypto where there is far more alpha to be extracted! This is how the two ETH Trending Alpha models were born.
I run them both at Alphachain Capital for a small group of select investors alongside my own capital. Bringing them onto the blockchain has been so exciting for me. A more transparent way for the investment management industry to run, and it is definitely the future of finance. Hence why I’m so excited to be here!
Weimingming: Given the nascent nature of the entire DeFi space, there’s a lot of tools that simply haven’t been built yet, limiting sets in the strategies they’re able to undertake. What sort of tools would you need to be built and included into the set protocol for you to construct your ideal set? What would those tools be and what would your set look like? Thinking more broadly, do you have any thoughts for additions to the defi space you’d like to see?
Adam: Thanks for the question. I’ve talked a little about this previously. At the fund we short and use leverage on our strategies. It changes the whole dynamic of the strategies and they perform exponentially better! Leverage and shorting tokens are two things which will completely change the strategies here on TokenSets. I like what Synthetix are doing asthey are bringing more traditional assets in token form which we can add to our strategies on TokenSets. Managing funds on the blockchain with a transparent, immutable and verifiable track record is so powerful in an industry which has been very closed off and secretive. This is the future of investment management and I very excited to be a part of it so early on.
Weimingming: Can you explain how the two sets perform in different market conditions? Which did better capitalizing on the 2019 and early 2020 run-ups, and which did better in the 2017 market? If leverage or other tools were available, how would you make use of them differently between the sets?
Adam: Both strategies are trend following strategies. This means that when markets are choppy and moving sideways, they don’t perform as well and can result in losses. Where they do well is when markets are trending. In our in-house strategies we trade the LT with 4x leverage and the ST with 1.5x. The difference is based on the risk we consider each strategy to have. That with less risk we can assign more leverage.
In 2017 they both performed pretty similarly. ST 2.0 4716% and LT 2.4670%, the ST had a slightly higher drawdown. In 2019 they both rode the run-up to varying degrees, the LT in two trades from 163 to 275, the ST across multiple trades, however the ST performed significantly better in 2019 as a whole. In 2020 the LT entered the uptrend at 189 to 225, however the ST performed very well at the beginning of the year, up 51% across two trades.
Weimingming: If you could bet on your your set outperforming others, would you? Kidding, but that should be a thing! Looking forward to getting into your sets and thanks for taking part in this.
Adam: There’s lots of great social traders on TokenSets offering different things, that’s what I love about the TokenSets platform. It gives you guys choice! Well I have a good amount of capital in my two sets and not in any others, so take from that what you will. I’m sure some of the guys here will do great things.
Superduper: I just want to say thank you for a great job, started copying a week ago and i’m sad i did not find TokenSets earlier!
Adam: Thank you. Likewise, this platform is going to go onto huge things. Now each Set has its own ERC20 token there’s so much possibilities. If the funds grow large enough they can be traded on other exchanges. That’s the vision we have here.
CryptoF: How do you determine the maximum amount of leverage used? How do you make sure there is enough liquidity to trade?
Adam: Great question. We naturally take a conservative approach, basing the leverage on the risk in returns of maximum drawdowns and a realistic standard error based on sample size, and then allow significant room if we were to be wrong. Each trade we make with 100% of the capital, this is not normal, but allows the strategies to benefit from compounding. We feel taking 1.5x on the ST and 4x on LT to be conservative measures considering the testing. An issue which does arise sometimes is issues around liquidity. Due to the way we trade, sometimes we will be working an order into the market for 2 hours — this is why we use manual execution and not automated. We can more effectively manage order sizing based on current liquidity.
Onerise: Whats the advantage of Social Sets vs Robo Sets?
Adam: Great question. Now obviously I’m biased, but here’s my perspective. We are professional money managers for clients, this is what we do for a living. Not only that, social traders have a limited focus on a certain number of Sets which they take pride in and usually have their own money invested in. For me personally, I would rather someone experienced in the field with a focus on my Sets to manage my money which also allows for more accountability if something goes wrong. The Set team have done a great job with the website and there are some great Robo Sets that perform well, but there are a lot of them that must be managed. This is just my personal opinion.
CryptoF: Thanks for the reply. Are the contracts still called/executed by humans?
Adam: On TokenSets our strategies are systematic, the model generates the signal, but we execute the rebalancing on TokenSets manually. Its a fairly automated process on here, they make it fairly easy, however I like to watch over the rebalances to ensure everything runs smoothly. This is different to how we trade on centralised exchanges on behalf of the fund, when we could be working one trade for several hours due to the size and liquidity in the market. The guys in the team can give you more info on the rebalancing process. There is a way you can get involved in it too!
Onerise: I’m interested in the ETH Alpha LT, what then occurs once I have set up my wallet and purchased your Set?
Adam: You will receive one of the ETH Trending Alpha LT Set tokens (as an ERC20) which will sit in your wallet. Its value will change as the performance of the fund changes. You can sell it at any time.
Gubbs: Hi Adam. Your current Sets are comprised of WETH and DAI. The new Sets, that will be live shortly will change it? If so, what are the reasons / benefits.
Adam: The new Sets will be ETH and cDAI/cUSDC. The difference is we will add the interest bearing element from Compound to the USD token. With the recent issues with DAI it seems sensible to transition to USDC. While I am naturally more attracted to the decentralised DAI token, the peg issues are distorting the performance of the funds. It pains me to say it but USDC seems to be the more sensible option.
Norsewulf: If someone was interested in your Sets, but wanted to diversify somewhat, would you agree that it would be a fine approach to split the investment between your LT and ST sets evenly?
Adam: Great point, yes for sure. You will notice I have split my allocations across the two on TokenSets, around 2/3 into ST and 1/3 into LT. It would be wise to diversify, with the split between the two depending on your risk appetite. A more risky allocation would have more allocated to ST over LT. LT doesn’t trade often but has a high strike rate and can ride those large trends, the ST can exploit some of the smaller trends and catch some of the big ones too, but to a lesser degree.
Onerise: What’s the difference between the LT and ST Sets?
Adam: LT stands for Long Term, ST stands for Short Term, it refers to the nature of the strategy and how often it trades and over what time frames. The choice is really up to you. With the LT model you will need to be patient, it doesn’t trade often, however if are someone who would find that frustrating then the ST would be better as it would trade more often.
AndyG: Do you have plans for future sets?
Adam: Not at the moment. We have a passion for Ethereum and DeFi. We don’t yet have plans for BTC or LINK based Sets. However if other assets join TokenSets that may change.
CoffeeTalk: I would say someone may choose a Robo strategy over a Social Trader Set as the parameters or buy sell indicators are more clearly defined. Also when a trader is involved the chance of human error comes into play. One could argue that the human trader would make wiser choices though, being able to consider more factors and indicators.
Adam: Thanks, all fair points. They are more transparent for sure and it can be hard to do due diligence on the social traders.
CoffeeTalk: It makes sense though. A social trader doesn’t want to give away all their secrets. Out of curiosity, do you diversify by having some Robo Sets? Or just the two you manage?
Adam: Good question. As I do this for a living I assume (whether rightly or wrongly) that I can do better than the Robo Sets, so I haven’t allocated any capital there. I like to have more control over the process, and with DeFi being temperamental at times I like having oversight of everything when it happens. The Robo Sets currently have an oracle which updates once ever 24 hours (I believe) which restricts the effectiveness of some shorter term strategies in my opinion. I’m sure they are looking at improving that pretty soon anyway.
Norsewulf: In regards to Robo Strategy over Social Trader, there’s a higher lever of trust that one needs to put into a social trader, which plays a factor in decision making. Transparency, history, profile info, and algo/trading rule data can help with this.
Maybe off-topic, but a lot of people have been burned by financial advisors and investment managers who trade their investments in the regular stock market. Take for example this latest crash. Name an investment manager who advised their clients to take their money out in Jan when the market was so obviously inflated/over-saturated. You probably cant, because they have their own bias, which is to get their clients to invest more, and ultimately tons of people lots tons of money this past month. I realize Social Trader Sets are different. It’s not comparing apples to apples, but I think there is a bit of that mentality of letting someone else control your investments/trades to a certain degree, which can worry people after being burned elsewhere.
Adam: Great point, I like that. You are totally right, it’s all about incentives. A broker will want to you trade over and over again. When he tells you to sell its only because he has a better stock to sell you, its called churn, and that’s where they make money. You’ll notice it’s very difference here. My Sets avoided this huge sell off and in ETH terms are the best performing Social Trading Sets on the platform. Our incentives are aligned, when the new fees come in (in 2 weeks) I will receive performance fees based on the profits I make the Set buyers. Alignment of incentives is important everywhere, and here I think the TokenSets guys have got it worked out pretty well.
Gubbs: Based on the latest events that affected all markets, do you believe the bottom for crypto is in, or we have much more room to downside? If so, is it an opportunity to make profits out of it using your sets?
Adam: Wow that is a question. I often get asked where prices are heading, this is not something we do as we just don’t know… no one does! Anyone that tells you they do is lying, guessing, or they are a whale pushing the price higher. Our model does all the work for us. I personally feel considering the global pandemic we are in unprecedented times and crypto has no fundamental value to rely upon. This means there’s no obvious floor to prices. I’m not confident this is the bottom, it could go either way very easily in my opinion.
Norsewulf: Is there a bad time to buy your Set? Like for example, if I’m ready to buy, is better/worse/no-different to buy your Set when it’s in DAI vs ETH? And what about just after rebalancing, or if it looks like it might rebalance in the near future? I’m not so familiar with all of the technicals behind that sort of thing.
Adam: Yes, a bad time to buy the set is when its already in a trade! When it’s in cash is the best time because it allows you to avoid in-trade drawdowns. People often try to pick when to enter these Sets. Unless you have a strong trading track record, don’t do it. You’re essentially make trading decisions which the Sets are already doing. Mine are in cash at the moment for a reason, its how they are up 125% vs ETH today, just by knowing when to be out of the market. If you are not a good crypto trader I would recommend getting in when the Sets are in cash. If you are good at it then you will have you own view on ETH and when to get in.
