An Etherum-based financial instrument that captures crypto's unstable attributes for the user's benefit has been launched by Set Labs, a San Francisco-based investment platform. The “Trend Trading ETH 20 Day Simple Moving Average Crossover Set” uses a moving average that has been back-tested by two years to capture price swings and limit volatility.
The Set uses MakerDAO’s ETH/USD price oracle to track the daily price and the moving average of Ethereum. It is programmed to make trades whenever the current rate of ETH/USD crosses the 20-Day Simple Moving Average indicator. This gives rise to two scenarios when the Set is in ETH:
The price goes below the moving average, it rebalances ETH into USDC.
The price moves above the moving average, it rebalances USDC into ETH.
Felix Feng, CEO of the firm said:
“Essentially, you would be momentum investing or swing trading,” he continued "Typically, momentum trading is effective in markets that 1) do not have valuation models, 2) have large amounts of volatility, and 3) have frequent mispricings. Momentum investing is not typically used in US stocks, bonds, or options – as they have clear valuation models (e.g. discounted cash flow analysis for stocks and black Scholes for options). However, for commodities and assets like crypto – momentum trading can be an effective strategy that allows protection from losses in downtrends and capture subside on the uptrends. Based on historical data, this may be an extremely effective strategy – until a valuation model has been figured out.”
This update will be extremely time-saving since investors/traders don’t need to draw trend lines and apply technical indicators manually. Set will take care of all by using smart contracts to eliminate human effort.
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The Set will take away all the human effort required in drawing trendlines and applying technical analysis.
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