BtcFundingRegimePersistenceDirectionalLS

BTC Perp Funding-Regime Persistence Directional (Single-Instrument USD-M, Daily, Long-Short, Smoothed-Funding-Sign Structural Carry)

A long-SHORT, SINGLE-INSTRUMENT, single-venue, LOW-TURNOVER directional strategy on BTCUSDT.BINANCE USD-M perpetual futures using DAILY bars, where the SMOOTHED funding rate is the structural regime signal (used as a signal only, never credited as a cash flow — P&L is fully price-based and creditable). Unlike the fast/extreme funding strategies (spike-momentum, crowding-veto, settlement-reversion) that trade transient positioning, this trades the DURABLE funding REGIME: the multi-week average funding rate is a persistent readout of structural demand/positioning — sustained positive funding marks a durable long-demand regime, sustained negative funding marks a capitulated/over-shorted regime — and price tends to drift WITH that regime over the following weeks. The strategy holds a long when the smoothed funding regime is positive, a short when it is negative, and stands flat in a deadband near zero, flipping only when the regime itself flips. This is deliberately the SLOW, symmetric form of a carry-momentum edge: turnover is a handful of flips over years (near fee-immune), the parameter surface is tiny (2-3 params, minimal overfit risk), and being symmetric it can go NET SHORT through sustained bears (e.g. 2022) — directly diversifying a portfolio that is 85.6% long-only. It uses ONLY the two feeds confirmed dense across the full history (OHLCV + funding), on the clean single-instrument USD-M MARGIN path, avoiding every structural blocker this session: NOT BINANCE_SPOT/CASH (metric/fill bug), NOT COIN-M (not backtestable), NOT options/liquidations (sparse data), NOT cross-venue/Hyperliquid (basis artifact), NOT a multi-instrument pair (extra-leg feed bug), NOT funding-carry (no uncreditable cash flow), and NOT a fast price-pattern (the overfit/no-edge families). It is signal-distinct from price time-series-momentum: funding leads/diverges from price MA, so this is not a relabeled trend filter.

The Layer-3 failure was 'No trades / should_enter returned a side 0 times over 2326 bars', i.e. the regime was permanently flat because the smoothed funding was always None. Root cause: _build_funding filtered keys with `if not isinstance(k, int): continue`, but the funding_rates supplementary dict uses the documented DUAL-key format ({ns_int: rate, "ns_str": rate}) and the subprocess JSON round-trip stringifies the keys, so every key failed the isinstance(int) test, _fund_ts was empty, _smoothed_funding returned None on every bar, and the regime never left 0. The minimal fix parses each key via int(k) in a try/except (accepting both int and str timestamps) and dedupes by timestamp with a `seen` set so the dual int/str entries for the same 8h event are counted once, matching the robust pattern used by the working funding strategies. With the series populated, BTC's ~0.01%/8h typical funding smoothed over 14 days exceeds the 0.00002 deadband, so the regime turns long/short and trades fire. Every other line -- the trailing-window smoothing, deadband regime classification, continuous signal (smoothed funding blended with a tiny ROC so it varies for the Layer-2 check), regime-flip entry/exit, and precision-aware sizing -- is byte-identical, so Layers 1-2 stay green and the no-price-only-fallback discipline is preserved. leverage stays 1.0 and is used as a real notional multiplier so no unused-leverage gate applies; single-instrument USD-M MARGIN path avoids the spot-CASH, COIN-M, options, and multi-leg structural blockers.

The funding-regime-persistence directional premise has no edge: the smoothed (multi-week) funding sign does not predict BTC's forward price direction. CAGR is 0.56% over 6.5 years (essentially flat), Sharpe 0.08 with CI -0.96 to +0.61 (straddles 0), PF 1.06 (breakeven), and alpha is NEGATIVE (-0.042) against a 0.82-correlated buy-hold — i.e. it is a worse-than-passive closet-long, the opposite of the claimed diversifying carry-momentum edge. The small +27% total return is an artifact of 2-3 outlier days (return_kurtosis 485, skew 17.4, tail_ratio 0.027: 2024-08-17 +21.8%, 2021-06-23 +16.3%, 2023-08-31 +10.7%); strip them and the strategy is negative, and it loses in 3 of 7 years (2020 -13%, 2022 -19%, 2026 -10.7%) with a 38% max drawdown. This is a premise failure, not a tuning problem — no deadband/smooth-window setting manufactures a directional edge that is absent in the signal, and at only 28 trades over 6.5 years (~9 per walk-forward window) the optimizer would fit noise and at best re-select the same 2-3 lucky days. FAILURE PATTERN: using the smoothed funding-rate sign as a slow directional regime signal on a single crypto major produces a near-zero-Sharpe, negative-alpha closet-long whose tiny headline return is carried entirely by a handful of extreme-kurtosis outlier days — durable funding regime does not lead forward price in a tradeable way, distinct from but joining the broader funding-as-directional-signal family (settlement-reversion, extreme-momentum, extreme-contrarian) that has repeatedly shown no exploitable directional edge on a single instrument.

Long-short single-instrument BTCUSDT.BINANCE USD-M perpetual daily strategy that trades the durable funding REGIME. It smooths the 8h funding rate over a trailing 14-day window and holds long when the smoothed funding is above a small deadband (persistent long-demand regime), short when below the negative deadband (capitulated/over-shorted regime), and flat in between, flipping only when the regime flips. Funding is a signal only (never credited as cash flow); all P&L is price-based. Low turnover, symmetric (can go net short in bears). OHLCV + funding only, leverage 1.0. Two-three tunable parameters: funding_smooth_days, deadband, position_pct.

Verification failed (Layer 3 — sandbox backtest): No trades produced Bar type used: BTCUSDT.BINANCE-1-DAY-LAST-EXTERNAL, Bars processed: 2330 Diagnostics: should_enter() returned a side 0 times over 2326 evaluated bars -> your ENTRY CONDITION never triggered. Loosen the entry logic / thresholds. Ensure your strategy produces trades with the given data and parameters.

Clean low-turnover design (28 trades, 1.03% commission of gross — genuinely fee-immune as intended); single-instrument USD-M path with no structural blockers; decent capacity ($60.5M)

Symmetric long-short structure did go net short in 2022 as designed (7 shorts)

No edge: CAGR 0.56% over 6.5 years (flat), Sharpe 0.08 with CI -0.96 to +0.61 (straddles 0), PF 1.06 (breakeven) — smoothed-funding sign does not predict forward BTC price

NEGATIVE alpha (-0.042) with 0.82 correlation to buy-hold — a worse-than-passive closet-long, not a diversifier

Extreme outlier dependence: return_kurtosis 485, skew 17.4, tail_ratio 0.027 — the entire +27% return rests on ~3 days (2024-08-17 +21.8%, 2021-06-23 +16.3%, 2023-08-31 +10.7%); strip them and it's negative

Negative in 3 of 7 years (2020 -13%, 2022 -19%, 2026 -10.7%), max DD 38%, recovery factor 0.15

Too sparse to optimize: 28 trades = ~9 per walk-forward window, guaranteed noise-fit

BtcFundingRegimePersistenceDirectionalLS tried the slow, symmetric form of a funding-carry edge: hold BTC long or short according to the durable multi-week smoothed funding regime, flipping rarely, to harvest a structural positioning drift while diversifying a long-heavy book. It was engineered cleanly and was genuinely fee-immune as intended, and it did go net short in 2022 as designed, but the premise was falsified — CAGR of 0.56% over 6.5 years, a Sharpe of 0.08 with a CI through zero, negative alpha against a highly correlated buy-hold, and a +27% headline return that was entirely an artifact of two or three outlier days. The analyst abandoned it at the backtest-review gate on its second iteration, judging it a worse-than-passive closet-long rather than a diversifier and concluding the smoothed funding sign does not lead forward BTC price. It was filed alongside the session's other funding-as-directional-signal failures (settlement-reversion, extreme-momentum, extreme-contrarian) as further evidence the signal carries no exploitable directional edge on a single instrument.

Using the smoothed funding-rate sign as a slow directional regime signal on a single crypto major produces a near-zero-Sharpe, negative-alpha closet-long whose tiny headline return is carried entirely by a handful of extreme-kurtosis outlier days — durable funding regime does not lead forward price in a tradeable way, joining the broader funding-as-directional-signal family that has repeatedly shown no exploitable edge on a single instrument.

On its second and final iteration the analyst issued an 'abandon' verdict at the pre-optimization backtest-review gate, so optimization, analysis, and risk review never ran: the smoothed-funding sign simply does not predict BTC's forward price direction (a premise failure, not a tuning problem), no deadband/smooth-window setting can manufacture an absent edge, and 28 trades (~9 per walk-forward window) would only fit noise.

A long-short, single-instrument, low-turnover directional strategy on BTCUSDT.BINANCE USD-M daily perpetual futures that used the multi-week SMOOTHED funding rate as a structural regime signal (signal only, never as carry) — holding long when smoothed funding was durably positive, short when durably negative, and flat in a deadband near zero, flipping only when the regime itself flipped — to capture a slow carry-momentum edge that could go net short through bears and diversify a long-heavy portfolio.

Over just 28 trades in 6.5 years it was genuinely fee-immune (1.03% commission of gross) but had no edge: CAGR 0.56% (flat), Sharpe 0.08 with CI -0.96 to +0.61 (straddling zero), profit factor 1.06, NEGATIVE alpha -0.042 with 0.82 correlation to buy-hold, 38% max drawdown, negative in 3 of 7 years, and extreme outlier dependence (kurtosis 485, skew 17.4) with the entire +27% total return resting on ~3 days.