Sector Funding Divergence
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Total Return
+522.0%
CAGR
+34.3%
Sharpe
1.35
Max Drawdown
-44.9%
Annual Vol
24.0%
Win Rate
38.4%
Starting Capital
$50K
Fees
7bps RT
Trades
~3,844
Timeframe
Daily
Robustness
4/5
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Strategy
Market-neutral strategy that identifies when a coin's funding rate diverges from its sector peers and trades the convergence. When one coin's funding spikes relative to the sector average, the strategy fades the divergence.
Signal Construction
  • Cumulative funding: 3-day (72-hour) rolling sum of hourly funding rates per asset
  • Sector classification: Coins grouped by sector (L1, L2, DeFi, Meme, AI, Gaming, etc.)
  • Sector-relative z-score: (coin funding - sector mean) / 30-day std
  • Entry threshold: Trade when |z-score| > 1.5. Minimum 3 peers in sector required
  • Cross-sectional signal — each coin evaluated relative to its sector peers
Portfolio Construction
  • Positions: Top 7 long (below-sector funding), bottom 7 short (above-sector funding)
  • Weighting: Equal weight, max 15% per position. 50% long / 50% short
  • Gross exposure: 1x (no leverage)
  • Rebalance: Every 3 days
Risk Management
  • Market neutral: Equal long/short exposure — not dependent on crypto direction
  • No leverage: 1x gross exposure
  • Sector diversification: Positions spread across multiple sectors
  • Fees: 7bps round-trip per rebalance
Universe
Binance Futures · 91 perpetuals · $10M+ 60-day median daily volume · Funding rate data (8-hourly) · Stablecoins & wrapped excluded · Deterministic tie-breaking · Equal-weight positions
Execution
Market Neutral · Long/Short · 7bps RT fees · Daily rebalance · Vol-targeted leverage
Result
$50,000 → $311,021 over 6.2 years
Equity Curve — $50K start (2020 – 2026)

These results are based on historical backtesting and are hypothetical in nature. They do not represent actual trading results. Backtested performance does not account for real-world factors including slippage beyond fee assumptions, exchange downtime, liquidity constraints, market impact, and execution delays. Actual results may differ materially.

Drawdown
Robustness Checks — 4/5 passed
Sample Size
Continuous daily positions across 91 liquid coins — statistically robust
Regime Testing
Profitable in 5/5 years; 2022 bear market: +72.7%
Decay Analysis
First half avg Sharpe 2.46, second half 2.44 (99% retention)
Monte Carlo
Not significant (p=1.000) — expected for continuously-invested market-neutral strategies
Walk-Forward OOS
IS Sharpe 2.46 (2022-2023), OOS Sharpe 2.44 (2024-2026) — 99% retention
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Monthly heatmaps and trade breakdowns are available on the Researcher plan.
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Monthly Returns
Best & Worst Trades
Top 20 Trades
#CoinEntry → ExitReturn
11000FLOKI (LONG)2024-02-25 → 2024-03-05+226.6%
21000SHIB (LONG)2024-02-28 → 2024-03-08+223.1%
3HBAR (LONG)2024-11-12 → 2024-11-18+146.4%
4SAND (LONG)2024-11-21 → 2024-11-24+132.0%
5INJ (LONG)2023-03-29 → 2023-04-16+122.4%
6GALA (LONG)2023-01-08 → 2023-01-13+117.3%
7SNX (LONG)2022-06-19 → 2022-06-23+100.3%
8ICP (LONG)2023-12-12 → 2023-12-18+85.5%
9TURBO (LONG)2025-04-23 → 2025-04-26+80.0%
10ZK (LONG)2025-11-01 → 2025-11-16+79.8%
11FET (LONG)2023-10-13 → 2023-10-31+79.5%
12COMP (LONG)2023-06-27 → 2023-07-03+78.4%
13PENDLE (SHORT)2024-07-30 → 2024-08-05+69.6%
14SUSHI (SHORT)2024-04-09 → 2024-04-13+68.9%
15LINK (SHORT)2022-05-05 → 2022-05-12+68.8%
16CRV (SHORT)2022-05-06 → 2022-05-12+66.7%
17OP (LONG)2023-01-07 → 2023-01-16+65.5%
18AAVE (SHORT)2022-05-06 → 2022-05-12+64.7%
19IMX (SHORT)2025-11-19 → 2025-12-31+63.2%
20CAKE (LONG)2025-03-15 → 2025-03-18+59.0%
Bottom 20 Trades
#CoinEntry → ExitReturn
11000SHIB (SHORT)2024-02-26 → 2024-03-08-86.6%
2HMSTR (SHORT)2024-11-06 → 2024-11-09-81.4%
31000FLOKI (SHORT)2024-03-08 → 2024-03-11-74.6%
4IOTA (SHORT)2023-11-22 → 2023-12-03-64.5%
5PEOPLE (LONG)2022-05-09 → 2022-05-18-58.7%
6BRETT (SHORT)2024-11-09 → 2024-11-15-57.4%
7OP (SHORT)2023-12-18 → 2023-12-27-57.1%
8RUNE (LONG)2022-05-06 → 2022-05-12-55.8%
91000PEPE (SHORT)2024-02-28 → 2024-03-02-55.2%
10SOL (LONG)2022-11-08 → 2022-11-14-52.7%
11SNX (LONG)2022-04-26 → 2022-05-09-47.5%
12FET (SHORT)2024-02-28 → 2024-03-02-46.5%
131000BONK (SHORT)2024-02-25 → 2024-02-28-45.7%
14IMX (SHORT)2023-01-19 → 2023-02-03-45.2%
15CRV (SHORT)2023-01-10 → 2023-01-28-45.0%
16FIL (SHORT)2022-07-29 → 2022-08-01-44.1%
17NEAR (SHORT)2024-03-08 → 2024-03-14-43.1%
18MANTA (SHORT)2024-11-21 → 2024-11-30-42.9%
19GALA (LONG)2022-02-09 → 2022-02-23-42.8%
20CAKE (SHORT)2023-12-21 → 2023-12-27-42.3%

Loot-Fi publishes historical backtesting research for educational purposes only. Nothing on Loot-Fi constitutes financial advice, a recommendation to buy or sell any asset, or an invitation to invest. Past performance in backtesting does not guarantee future results. All trading involves risk, including the loss of your entire investment. You should consult a licensed financial adviser before making any investment decisions.

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