Traders are increasing as Crypto investment becomes more common, but 99% still lose principal within 300 days. Korean startup Alchemi Lab says this is just a behavioral finance problem and thinks it can be easily solved by designing a new trading window based on Modern Portfolio Theory (MPT).
MPT is well known as a mathematical formula that precisely calculates the optimal investment size given the measure of future uncertainty. However, it has only been properly used by financial institutions as it is too cumbersome and labor-intensive for individual investors to implement.
Alchemi Lab’s new trading interface ZOLBO,makes it convenient for all MPT believers to trade with the power of Probabilistic deep learning.
But the question remains, “does MPT really work?” Alchemi Lab had the same question, which is the only reason they started this study. The result of their research has been shocking. Over the past 15 months (‘21.03.01 ~ ‘22.07.12), their prototype model reached a cumulative return of 163% with a Sharpe ratio of more than 300%.
“We found out that MPT-styled investing can be easily adopted by everyday traders with some changes made to the trading interface,” says Sam Kim, the CEO of Alchemi Lab. “If everyone invests in this trading style, the market volatility will gradually decrease, reducing the cost of living worldwide.”
The Seoul-based fintech startup was established by CEO Sam Kim. Sam was working as a quantitative fund manager when he realized the need to create a better tool for working on crypto trades. Initially, he aimed to start a Robo-advisor business, but when he chanced upon Deep Learning, he began to work on Zolbo.
Sam gathered a team of like-minded experts from the quantitative finance industry, got funding from the Korean government for the startup and rolled out Zolbo app. And though the app was stalled in 2021 because of policy changes in Korea, Kim is hopeful of releasing a better version.
Alchemi Lab is now part of the Seoul FinTech Lab incubator and is looking to find investment for its venture. A VC, Keaton Nankivil, principal at Alumni Ventures, said, “The concept of Alchemi Lab is unique because of its adherence to MPT amongst endless investment products available in the market. The company can educate customers about the benefits of MPT and use of a platform like there.”
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