SOL-AVAX Smart-Contract L1 Pairs Spread Mean Reversion

Hypothesis

A market-neutral (dollar-neutral) pairs trading strategy on two highly correlated smart-contract Layer-1 altcoin futures: SOLUSDT and AVAXUSDT on Binance USD-M. Both are independent high-throughput L1 chains competing in the same niche (Solana ~65k TPS, Avalanche ~4.5k TPS subnet-aggregated), drive similar narratives (DeFi, NFT, RWA), and exhibit a 90-day rolling correlation typically above 0.80. Their price ratio (SOL-priced-in-AVAX) oscillates within regimes — when one chain has an idiosyncratic catalyst (Solana memecoin season, AVAX subnet launch), the ratio diverges sharply, then mean-reverts as fundamentals/flows normalize. The strategy follows the proven pattern of the successful ADA-DOT and ETH-BTC ratio trades already in the portfolio: compute the log-ratio z-score on a 4-hour timeframe, fade extreme readings (|z|>2.0), exit at z-score reversion to ±0.3. Long the underperforming leg, short the outperforming leg in equal dollar amounts. Captures relative-value alpha that is uncorrelated to overall crypto beta — diversifying the portfolio away from BTC-direction exposure.