Introducing the ETH 26 Day EMA Crossover Set
The ETH26EMACO Set is now live on TokenSets
Today, we’re introducing the second Exponential Moving Average Set on TokenSets — the ETH 26 Day EMA Crossover Set (ETH26EMACO).
Key Points:
- The ETH26EMACO Set is now live on TokenSets!
- The Set automatically rebalances based on a crossover between the price of ETH and the 26 Day Exponential Moving Average (26 EMA) technical indicator.
- The smart contracts and meta-oracles that power the ETH26EMACO have been externally audited by ABDK and are open-sourced in our Github repo.
Exponential Moving Averages (EMAs) assign more weight and value to recent prices than Simple Moving Averages (SMAs). EMAs are more responsive to sudden price fluctuations and reduce price lag compared to many other trend following strategies including SMAs. As a result, EMA indicators are more favored by short to medium term traders. Learn more on the difference between SMA and EMA here.
The ETH26EMACO Set
The ETH 26 Day EMA Crossover Set attempts to capitalize on price trends in order to accumulate ETH. If the price of ETH crosses below the 26 EMA, ETH26EMACO automatically rebalances all its ETH into USDC to stop losses in the downtrend. If the price of ETH crosses above the 26 EMA, ETH26EMACO rebalances its USDC into ETH to capture upside in the uptrend.
How is the ETH26EMACO different from ETH20SMACO?
The ETH 26 Day EMA Crossover and the ETH 20 Day Moving Average Crossover both generate a similar number of crossover signals and rebalances.
However, the ETH26EMACO rebalances based on a weighted average which detects trend reversals earlier than ETH20SMACO. In strong trending markets (2017 bull market, 2018 bear market) ETH26EMACO typically generates more reliable signals than that of ETH20SMACO. In range bound markets, ETH26EMACO will typically generate more false positive signals.
Both ETH20SMACO and ETH26EMACO can be used in combination to diversify the risk of false signals in trend trading.
How is the 26 EMA calculated on TokenSets?
The 26 EMA indicator is a weighted average of the on-chain MakerDAO ETH price for the past 26 days at 7:00 pm UTC each day. Link to technical documentation of the EMA oracle here.
How the ETH26EMACO Set Performs
Disclaimer: The content below is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. The content below is provided for educational purposes only, and not indicative of future performance. None of the following should be interpreted as investment advice. The tools used below follow a predefined set of parameters and aren’t actively managed by Set Labs Inc.
This chart below compares the hypothetical performance of holding the ETH26EMACO Set against holding ETH over the last 3 years, assuming a slippage rate of 1% during each rebalance. The model shows ETH26EMACO would have outperformed over the given historical time period and performed roughly the same in the long bull market of late 2017 — early 2018.
Utilizing the same historical period, ETH26EMACO would have also outperformed the ETH20SMACO Set. Link to ETH20SMACO details here.
The chart below illustrates the ETH that would have been accumulated using the ETH26EMACO Set following the same assumptions above.
It’s important to keep in mind the the charts above are based on a number of assumptions and are only meant for illustrative purposes. As always, past performance is not indicative of future performance.
These charts use generated ETH hourly data sourced from Gemini. In production, the ETH26EMACO Set rebalances based on MakerDAO’s ETH price feed, which may output different results. If you’d like to play around with the data yourself (and tweak the parameters), feel free to fork the spreadsheet here.
In what markets do the ETH26EMACO typically outperform and underperform?
ETH26EMACO typically outperforms in directional markets (bear or bull), and typically underperforms in choppy markets as EMAs may pick up more false signals resulting in more rebalances.
Why use the 26 Day Exponential Moving Average?
The 26 Day Exponential Moving Average (26 EMA) is one of the most popular trading indicators to determine when to enter and exit positions in the short to medium term.
The 26 EMA (along with the 12 EMA) is typically used to construct Moving Average Convergence Divergence or MACD — another extremely popular indicator.
Conclusion
Get started minting the ETH26EMACO Set on TokenSets here!
If you have an idea for a strategy that you’d like to see on TokenSets, please don’t hesitate to reach out to us.
Developers interested in working with us can also reach out to our friendly team by emailing us at hello@setprotocol.com or by joining our Telegram chat.
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