The post Crypto pairs trading for volatile markets appeared on BitcoinEthereumNews.com.

Disclosure: The views and opinions expressed here belong solely to the author and do not represent the views and opinions of crypto.news’ editorial. Crypto markets are renowned for their unpredictable peaks and troughs, such as prices skyrocketing overnight or plunging just as quickly. This leaves traders of all backgrounds—retail investors, hedge funds, and institutions—on edge. Amid this turbulence, pairs trading is a unique strategy for those seeking consistency without giving up the potential for meaningful returns. At its core, pairs trading involves choosing two crypto assets that have a solid statistical relationship, then taking a long position in the underpriced asset while simultaneously shorting the overpriced one. Rather than banking on a hunch that one coin will go “to the moon,” pairs trading zeroes in on how two assets behave relative to each other. If they diverge too much from their historical pattern, the strategy aims to profit when they revert to it. This approach can generate returns whether markets surge or slump, making it appealing to both large-scale funds and individual investors. Meaningful connections between crypto pairs Not all price movements that look in sync are anchored. Many assets move together in bullish or bearish markets, only to break apart when conditions shift. That’s why robust data science—namely “cointegration” tests—provides a higher degree of certainty. Cointegration goes beyond superficial correlation to verify that two assets share a meaningful pull toward each other over time. By analyzing accurate, comprehensive data and running cointegration tests, traders gain confidence in identifying these deeper pair relationships. If the spread between two cointegrated assets drifts too far from its average, the strategy is to buy the underpriced one and short the overpriced one. Once the prices converge, the profit results from that realignment rather than a bet on the overall market trend. Avoiding guesswork…

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Filed under: News - @ February 13, 2025 1:27 pm