Trading Games: Beating Passive Strategies in the Bullish Crypto Market

Rafael Baptista Palazzi

Journal of Futures Markets, 2025, vol. 45, issue 11, 1911-1933

Abstract: This study examines the effectiveness of cointegrated pairs trading in cryptocurrency markets, introducing systematic parameter optimization within the trading framework. The analysis is conducted using a dataset comprising ten major cryptocurrencies, selected based on market capitalization and consensus mechanism, spanning the period from January 2019 to May 2024. The methodology incorporates dynamic risk management through adaptive trailing stop‐loss and volatility filtering mechanisms. Empirical results demonstrate that the pairs trading strategy consistently outperforms conventional pairs trading and passive approaches, generating significant risk‐adjusted excess returns, while maintaining low market exposure. These findings contribute to the literature on empirical finance and provide valuable insights into alternative investment strategies for emerging digital asset markets.

Date: 2025
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