Crypto Retail Flow and Cross-Exchange Carry as Trading Factors
Summary
The article discusses two proposed crypto trading signals. The retail-flow factor uses order-book data to distinguish retail from institutional activity and treats unusually strong retail participation as a contrarian signal. The author reports a near-linear relationship with next-day returns, stronger results among larger-market-cap coins, and predictive performance after trading costs. The article also argues that carry signals can be improved by aggregating funding or related pricing information across exchanges, since less liquid venues may show larger pricing inefficiencies than a leading exchange.
The author reports next-day predictiveness and profitability under conservative cost assumptions for the enhanced carry factor, as well as a reversal pattern over the following two to three days. Suggested refinements include modeling carry’s tendency to retreat from extremes and using perpetual-futures premiums relative to spot. These claims are presented as the author’s analysis and a data provider’s research, without detailed test specifications, sample construction, or independent replication. The article acknowledges that competition could erode any persistent edge and also promotes a paid research service.
Key ideas
- High retail participation in crypto order books is proposed as a contrarian signal for subsequent returns.
- The article reports stronger retail-flow results among higher-market-cap coins and after trading costs.
- Aggregating carry information across exchanges may capture pricing inefficiencies missed by a single-venue signal.
- The reported carry factor predicts next-day returns and shows a reversal pattern over subsequent days.
- Carry models may incorporate reversion from extremes and perpetual-futures premiums relative to spot.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.