Beta-Hedged BTC–ETH Trading: Sizing, Triggers, and Backtest Limits

Summary

This article examines a proposed strategy that takes opposing BTC and ETH perpetual positions based on their relative moves. It explains why equal contract counts do not create a balanced hedge, then describes estimating ETH’s return beta against BTC, combining it with an average price ratio, and converting the result into integer contract quantities using each contract’s value. Entry logic uses BTC’s move and relative performance; the article also discusses take-profit and stop-loss controls.

A reported backtest covers roughly three months and shows a small positive return, a low win rate, and more losing than winning trades. The author contrasts this with a much larger return claim from the strategy’s inspiration. The evidence is limited to the stated backtest, whose transaction costs, slippage assumptions, and broader market representativeness are not fully documented. The article also notes that fees, infrequent signals, and simultaneous sharp moves in both assets can undermine the hedge, and suggests dynamic thresholds, cooldowns, and position sizing as possible improvements.

Key ideas

• Hedge BTC and ETH by exposure rather than matching contract counts one for one.
• The proposed hedge ratio combines the average price ratio with ETH’s return beta to BTC.
• Contract values and integer sizing affect the realized hedge ratio.
• The example’s backtest reports modest gains and a low win rate over a limited period.
• Fees, slippage, and joint moves in both assets can weaken the strategy.

Tags

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