By Keel Research Team · Updated May 12, 2026
A dollar-balanced long/short index — long privacy coins, short new-gen DeFi yield protocols. Both sides are in YTD drawdown; the basket extracts the relative spread. +22% YTD with Sharpe 1.96 and only -13% max drawdown.
Window: Jan 1 — May 1, 2026 (YTD). Equal-weight per leg, dollar-balanced long/short. $10,000 start → $12,224 end.
Verified 2026-05-12 against the live Keel backtest engine on Hyperliquid price data. Past backtest performance is not indicative of future returns.
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| Ticker | Category | YTD return | Target weight |
|---|---|---|---|
| XMR | L1 | -9.1% | 12.5% |
| DASH | L1 | -11.8% | 12.5% |
| ZEC | L1 | -33.7% | 12.5% |
| ZEN | L1 | -37.6% | 12.5% |
| Ticker | Category | YTD return | Target weight |
|---|---|---|---|
| −ONDO | DeFi | -30.5% | 12.5% |
| −SYRUP | DeFi | -33.2% | 12.5% |
| −ETHFI | DeFi | -44.2% | 12.5% |
| −ENA | DeFi | -52.2% | 12.5% |
Spread extraction: neither side rallied YTD. Privacy fell -23% avg; DeFi yield fell -40% avg. The L/S basket extracts the ~17-point spread. When one side goes neutral or positive, the basket leverages up — that’s the asymmetric upside.
Same Parallel-branch L/S construction as the AI/L2 rotation: long basket builds positive forecast at half the target leverage, short basket builds negative forecast at half, WeightConcatenator merges into a single dollar-balanced position.
The deeper thesis: privacy coins and yield-bearing DeFi sit on opposite ends of the regulatory-risk continuum. Privacy is maximally-decentralized (Monero ring signatures, Zcash zk-SNARKs); new-gen DeFi yield depends on TradFi rails (stablecoins, tokenized treasuries, restaking infrastructure with corporate counterparties). Their narratives are anticorrelated to compliance pressure.
Over a longer window (12M) privacy went +179% while new-gen DeFi compressed — this spread was much larger in 2024-2025 than today. The YTD result reflects mean reversion from that spread, not a structural collapse of the thesis.
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Privacy and DeFi yield sit at opposite ends of the regulatory-risk spectrum. Privacy coins are the maximally-decentralized end (Monero by design, Zcash structurally) and tend to rally on regulatory pressure. New-gen DeFi yield (ENA, ONDO) depends on TradFi rails and on-chain RWAs — it’s more vulnerable to compliance friction. The L/S structure isolates the regulatory-pressure spread.
The short leg lost more than the long leg. Privacy (-23% YTD avg) outperformed new-gen DeFi (-40% YTD avg) by ~17 points. Long minus short = positive spread. This is the core property of L/S indexes — neither side needs to go up; one side just needs to fall less than the other.
Two paths: (1) Privacy narrative cycles back — historical pattern is that XMR rallies hard on regulatory pressure or surveillance scandals. (2) New-gen DeFi yield remains structurally challenged — if the TradFi rails story slows or ENA/ONDO mechanics get scrutinized, the short side keeps paying. Either side moving creates spread; both moving creates more.
New-gen DeFi rips. ENA recovers if ETH ecosystem flow returns; ONDO benefits from tokenized treasury inflows. If the short basket rallies while privacy remains range-bound, the spread compresses and the trade loses. Mitigation: the L/S structure caps total exposure at the target leverage — drawdowns are bounded, not unlimited.
Partially. Privacy long benefits from crackdown narrative; DeFi-yield short benefits if RWA rails get scrutinized. But a coordinated multi-jurisdiction action could compress liquidity on both sides simultaneously. The trade is a narrative spread, not a fully-hedged regulatory hedge.