Systematic Returns refer to the portion of an investment’s total return that is attributable to broad market movements or macroeconomic factors, often unhedgable through diversification alone. In crypto, this implies returns derived from the overall trend of the digital asset market, such as a bull run across major cryptocurrencies, rather than specific asset selection or individual alpha-generating strategies. It quantifies the market’s inherent compensation for bearing general market risk.
Mechanism
The mechanism by which systematic returns are generated is primarily through exposure to the overall crypto market beta. As the entire digital asset market capitalization expands or contracts due to macro trends, regulatory shifts, or widespread adoption, most assets within that market tend to move in correlation. Diversified portfolios, while reducing idiosyncratic risk specific to individual assets, remain susceptible to these overarching market forces, leading to returns that are systematic in nature.
Methodology
Measuring and managing systematic returns involves methodologies adapted from traditional finance, such as the Capital Asset Pricing Model (CAPM), to isolate the beta component of a crypto portfolio’s performance. Investors seeking to gain systematic returns typically invest in broad market indices or diversified baskets of major digital assets. Conversely, those aiming to hedge against systematic risk may employ inverse exchange-traded products or short derivatives on market indices to offset broad market downturns, thereby controlling overall portfolio exposure to market movements.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
