Three Cross-Sectional Crypto Selection Factors: Volatility, Volume Shape, and Price

Summary

The code describes three candidate factors for ranking crypto assets: an ATR-based volatility measure, a volume-distribution measure, and an inverse-price measure. The volatility function calculates ATR over 14 periods, ranks the observations, and maps the highest rank through a normal cumulative distribution. The volume function compares leading digits of scaled volumes with a Benford-style reference distribution and uses squared deviations as a proxy for unusual activity. The price factor is the reciprocal of the latest close, so lower-priced assets receive larger values. A standardization function is also provided to put factor values on a common scale.

These are proposed ranking inputs, not a complete selection or trading system: the document specifies no universe, factor weights, rebalance rules, transaction costs, or backtest evidence. The volume deviation is only an indirect proxy for institutional activity and does not establish who traded. The implementation also appears to contain naming and data-handling issues, including a mismatched volatility-function assignment and no returned value from the standardization routine, so it needs review before use.

Key ideas

• The proposed volatility factor ranks ATR observations and transforms the top rank using a normal cumulative distribution.
• The volume factor measures deviation of observed leading digits from a Benford-style reference distribution.
• The inverse-price factor assigns larger values to assets with lower latest prices.
• The document supplies no portfolio construction rules or evidence that these factors predict returns.
• The code appears to contain implementation issues that require correction and validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.