Research · March 2026
BTC-Optimized Relative Value: A BTC-Denominated Long/Short Strategy
By AlphaBeta
Overview
BTC-Optimized Relative Value is our flagship strategy. It's a BTC-denominated long/short fund that optimizes for BTC-based returns by taking systematic short positions on altcoins using BTC as collateral.
The core thesis is simple: over meaningful timeframes, the majority of altcoins lose value relative to Bitcoin. By systematically shorting alts that show deteriorating BTC-relative momentum, we capture this structural trend while managing risk through multi-timeframe analysis and regime detection.
How It Works
The strategy monitors a universe of altcoins across multiple timeframes — 1-day, 7-day, and 30-day — analyzing each asset's performance relative to BTC. When an altcoin shows sustained underperformance against Bitcoin, the system initiates a short position using BTC collateral.
Signal Generation
Positions are driven by a multi-timeframe confirmation framework:
- 1-day signals detect short-term momentum shifts
- 7-day signals confirm intermediate trends
- 30-day signals validate structural deterioration
A position is only initiated when signals align across timeframes, reducing false entries caused by mean reversion. We also apply a 3-day confirmation window to filter noise.
Regime Detection
Not all market environments favor this strategy. During "alt seasons" — periods where altcoins broadly outperform Bitcoin — the strategy reduces exposure. Our regime filter monitors BTC dominance trends and cross-asset correlation metrics to detect these shifts early.
When the regime filter triggers, existing positions are tightened and new entries are paused until conditions normalize.
Performance
Since inception in January 2025, the strategy has generated strong BTC-denominated returns:
- BTC Return: +88.5%
- BTC Return on Capital: +130.9%
- Best Day: +22.8%
- Worst Day: -13.6%
- Average Daily Return: +0.2%
The strategy is designed to compound BTC holdings. USD returns reflect both BTC market movement and strategy performance.
Risk Management
Risk is managed at multiple levels:
- Position-level: Individual position sizes are capped relative to total collateral
- Portfolio-level: Total leverage monitored via loan-to-value ratios with margin call and liquidation thresholds
- Regime-level: Alt season detection reduces or eliminates new entries during unfavorable regimes
- Volatility-adjusted: Position sizing adapts to realized volatility across the portfolio
The strategy maintains a diversified short book across 10-14 altcoin positions at any given time, limiting concentration risk. Portfolio HHI (Herfindahl-Hirschman Index) is monitored to ensure no single position dominates exposure.
Why BTC-Denominated?
Most crypto funds report in USD. We report in BTC because our investors hold Bitcoin as their base asset. A strategy that returns +50% in USD during a year when Bitcoin rises +100% has actually lost value for a BTC-native investor.
By denominating everything in BTC — collateral, liabilities, returns, and risk metrics — we align the strategy with how our investors think about wealth.
Conclusion
BTC-Optimized Relative Value captures the long-term structural trend of altcoin underperformance against Bitcoin through a systematic, risk-managed framework. It's not a directional bet on Bitcoin going up — it's a relative value strategy that profits when the BTC/alt spread widens, regardless of the USD price of Bitcoin.
This is not investment advice. Past performance is not indicative of future results.