KILLED · crowded
Hypothesis
The classic Gatev distance method — pair assets by minimal normalized-price distance, trade 2-sigma divergences — works on crypto majors.
Math
$$ \text{SSD}_{ij}=\sum_t\big(\tilde P_{i,t}-\tilde P_{j,t}\big)^2,\quad \text{trade at } |spread|>2\sigma $$
Method
Form pairs on a 12-month formation window, trade 6-month, normalized prices, costs applied; replicated across 2019–2026.
Results
| Pre-2020 (less crowded) | small positive |
| Post-2021 | decays to ≈0 |
The original equities edge has decayed everywhere it was published, crypto included — it is the most-replicated stat-arb in the literature and is arbitraged out. Faint pre-2020, dead after. Killed.
A strategy in every textbook is a strategy in every competitor’s backtest. Published edges decay toward zero precisely because they are published.