Asset Universe Construction

Asset universe construction is the process of selecting the specific set of assets that will be included in a backtest or portfolio. This involves defining criteria such as minimum market capitalization, average daily volume, or specific sector characteristics.

In crypto, the universe is constantly changing as new projects launch and old ones fail. A well-constructed universe must account for these changes over time to avoid survivorship bias.

By defining a clear, objective set of rules for inclusion and exclusion, researchers can ensure their backtest results are reproducible and meaningful. This process is crucial for scaling strategies, as it determines the scope and liquidity of the assets being traded, directly impacting the strategy's potential performance and risk profile.