Testing Bitcoin-Hedged Altcoin Strategies on Binance Perpetuals

Summary

This research explores two approaches to trading baskets of Binance perpetual contracts. The first shorts a selected group of altcoins while holding a similarly valued Bitcoin position, aiming to reduce exposure to broad market moves. The second compares each coin’s normalized price with an altcoin index, shorting those above the index and longing those below it in proportion to the deviation, with Bitcoin available as an additional hedge. The author screens assets using historical price paths and correlations, then constructs a custom backtest because the platform’s local engine did not support the required multi-currency data.

The notebook presents plots and historical examples from 2020, but the reported period is limited and its results are not evidence of future performance. The backtest accounts for fees but omits slippage and largely ignores funding rates and margin-maintenance effects. The author also notes that the broad altcoin short could lose if the market rises from a low, while the relative-value approach can build a concentrated position in a coin that continues diverging. Asset selection and parameters are historical and require fresh validation.

Key ideas

• A Bitcoin hedge can offset broad market exposure when shorting a basket of altcoin perpetual contracts.
• A relative-value approach compares each coin with a normalized basket index and sizes trades according to deviations.
• Historical price trends and correlations are used to screen assets, but the selected set is tied to the study period.
• The custom backtest includes transaction fees but omits slippage and simplifies funding and margin effects.
• The basket strategy may lose in a broad altcoin recovery, while the relative-value strategy risks concentration in persistent outliers.

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