The Importance of Benchmarking Performance
Data driven decision making produces better results
Statistics are the most important skills I have learned through school and work experience over the last couple decades. They are essential and powerful for setting goals, monitoring progress, and making adjustments while managing investments. Every discipline has specific, valuable statistics to deliver high signal and help operators remain efficient.
Tracking our fund portfolio is something I spend a significant amount of time on each day. Fortunately, the majority of traditional finance metrics translate well over to cryptocurrency. Our fund hypothesis and strategy required a statistical approach for deploying capital and I’ve implemented benchmarks to help keep us on track to achieving our goals.
As an actively managed DeFi fund, our value proposition is to deploy and utilize capital efficiently across high quality, liquid, and composable assets to generate yield.
This is the framework for generating alpha and delivering outsized returns to our investors. Here are the most critical benchmarks that we’ve set.
Fund performance against BTC, ETH, DPI, and Greyscale DeFi Index
Capital efficiency - return on invested capital (yield generated)
The above metrics help us make collective decisions when the fund performs differently than expectations. We are continuously asking each other questions about:
Risk management
Are we taking enough risk to generate yield?
Is it time to rebalance the portfolio?
Are we safely leveraged?
Tracking individual asset performance over time is also critical to the success of our fund due to its short duration. Tracking individual assets helps make decisions around taking profits into stablecoins much more data driven.
This becomes especially important when the market is down because you’ll make educated decisions about where to deploy your dry powder.
Useful Resources:
I use CoinGecko and CoinMarketCap’s free APIs. Building analytics dashboards is fun and rewarding, and I’d encourage you to do it for your own portfolio.
CoinMarketCap API Documentation
Another excellent tool is API Connector, which works within Google Sheets and allows teams to collaborate.
Hard to manage price and return in DeFi