Are there cryptocurrencies that are so alike that they generally track each other and reliably revert whenever they diverge? In their December 2025 paper entitled "Pairs Trading in Crypto", Sasha Stoikov, Dora Xu, Shijie Shao, Yourui Wang, Tongshu Zhang and Jinxuan Hu show how to identify cryptocurrency pairs with stable relationships and execute mean reversion strategies in real time. Specifically, they:
- Identify pairs to trade by combining correlation behaviors, structural metadata and stability diagnostics.
- Generate entry thresholds, exit rules and risk controls (stop-loss, pair suspension and pair abandonment) for long-short trades that exploit overvaluation and undervaluation of pairs based on rolling window divergences.
Starting with hourly data for a sample of 543 cryptocurrency perpetual futures contract series (147,153 potential pairs), with 800 days through February 2025 as a training set and March through September 2025 as a test set (plus some short live tests during late November and early December 2025), they find that:
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