Digital Quant Strategy: Moving Beyond Market Timing With Basis Arbitrage Strategies Across Market Cycles
In Brief
Digital Quant 2026 concludes with JZL Capital and Yohalpha Capital sharing insights on crypto markets, AI, quantitative strategies, and future trends.
After more than 60 days of live trading, the Digital Quant 2026 Global Digital Asset Quantitative Trading Competition officially concluded in Hong Kong on May 29, 2026.
Jointly initiated by Barron’s China and DeAI Expo, the competition launched on March 30, 2026, aiming to build the world’s first AI-driven quantitative trading platform featuring “long-cycle × live trading × multi-asset” competition.
Barron’s China conducted exclusive interviews with key members of participating teams JZL Capital and Yohalpha Capital, exploring topics including the current stage of the crypto market, future industry development and liquidity trends, trading strategies used during the competition, capital allocation between CEXs and DEXs, differences between traditional financial markets and crypto markets, and the integration of AI with quantitative trading.
The current crypto market has triggered multiple warning signals. Trading volume, volatility, and market sentiment have all fallen to extremely low levels, while Bitcoin has dropped more than 50% from its all-time high in October last year. From a quantitative perspective, which stage of the bear market are we currently in? Is there still room for further downside? Where does the team estimate the market bottom could be?
David | Yohalpha Capital: I believe the market is still some distance away from a full bear market capitulation. Our team adheres to a long-term investment philosophy of “making money in bull markets and accumulating assets in bear markets.” We do not attempt to predict short-term market direction or actively bet on price movements. At this stage, we do not have strong expectations that the bear market will end soon or that the market will quickly transition into a new bull cycle.
From a data perspective, among more than a dozen commonly used indicators, only two or three are currently approaching bottom-range levels, and even those readings are not particularly extreme. The number of market participants and institutions that have truly been cleared out is still insufficient to trigger a reshaping of the market structure.
Using China’s historical cycles as an analogy: only after the old order completely breaks down, interest relationships and resource allocation are reconstructed, and existing beneficiaries are fully cleared out can the next cycle of prosperity develop on a solid foundation. Otherwise, the foundation of the market recovery remains fragile — this is the difference between a “legitimate succession” and a temporary shift of power. At present, the previous cycle’s beneficiaries have not been sufficiently cleared out. Even if the market rebounds, the upside potential may remain limited.
From the perspective of market participant capitulation, several sentiment indicators have not yet reached extreme levels, suggesting that more time may still be needed.
What price level do you estimate for the market bottom?
Jay | Yohalpha Capital: We have been closely monitoring changes in Bitcoin spot ETF net outflows. At the current stage, Bitcoin spot ETFs have experienced their largest historical scale of net outflows.
Meanwhile, the impact of energy price shocks has reduced expectations for interest rate cuts. Market expectations have shifted from one or more rate cuts at the beginning of the year to maintaining current rates or even the possibility of further tightening. From a liquidity perspective, this has created significant pressure on Bitcoin and crypto assets.
The recent capital absorption effect from the semiconductor and memory sectors has also been an important factor influencing market performance.
Nathan | JZL Capital Quantitative Lead: From a quantitative team’s perspective, we mainly focus on several indicators closely related to our strategies.
The first is trading volume. Since December last year, the market has continued to decline. During this period, some altcoins have experienced short-term rallies, but most of these moves were driven by market makers or coordinated sentiment-driven price actions. For arbitrage strategies and volatility-sensitive strategies, execution has become increasingly difficult since last year, with overall returns gradually compressing.
The second indicator we monitor is funding rates. The most active period was from the end of 2024 to early 2025, when annualized returns from funding rate strategies could easily reach 40%–50%. Currently, funding rates face several challenges: first, trading volume has declined; second, capital has shifted away from the MEME market, with RWA assets and tokenized U.S. equities absorbing a significant amount of liquidity.
Funding rates across the market are currently at very depressed levels. Assets that can consistently maintain a 0.01% funding rate are already relatively rare. Under these conditions, trading capability and execution efficiency become increasingly important.
Overall, we believe the market remains in a bear market phase. However, as a quantitative team, we do not make directional predictions on market bottoms; instead, we focus on volatility opportunities.
That said, I believe another round of downside movement is still possible, potentially driven by two factors. First, during the 2021–2022 cycle, Bitcoin fell from $18,000 to $15,000, causing miners to face pressure and begin selling. A similar situation could occur this year.
Second, MicroStrategy’s preferred stock STRC is currently experiencing a deviation from its intended peg mechanism. If this continues, it could potentially affect MicroStrategy’s broader strategy, which is something the market is highly sensitive to.
Personally, I expect another significant pullback and correction is likely to occur in the future.
JZL team releases macro reports every week. Recently, are there any key indicators or emerging trends that the team is paying close attention to in order to help bring incremental capital back into the market?
Jason | JZL Capital Market Lead: We conduct weekly macro market reviews, focusing on monthly macroeconomic indicators such as GDP, PCE, and CPI, as well as short-, medium-, and long-term U.S. Treasury yields, VIX, commodity prices, and the performance of major risk assets.
Recently, we have been paying close attention to two key areas. The first is U.S. Treasury yields. Since the beginning of the year, the two-year Treasury yield has risen significantly, while the 30-year Treasury yield remained above 5% for a period of time in recent weeks. The simultaneous rise in both short-term and long-term rates has created pressure on market liquidity and risk asset valuations.
The second is crude oil prices. Oil prices have recently declined significantly, returning to around $70 per barrel. This helps ease inflationary pressure and supports the stabilization of market risk appetite.
From the perspective of incremental capital inflows, liquidity remains the most critical factor. If inflation continues to decline and interest rate pressure eases, improving liquidity expectations, it would provide a direct positive catalyst for crypto assets, especially Bitcoin.
Recently, the narrative that “crypto is dead” has resurfaced. How do you see the future development of crypto industry narratives, trading models, and the issue of liquidity depletion? How can these challenges be addressed?
Jay | Yohalpha Capital: I do not oppose the crypto industry embracing stock market trading, or even expanding into more national equity markets and other asset classes. This would be a valuable supplement. Even if market activity continues to be driven by U.S. equities-related opportunities, it can still provide more tools and opportunities for the quantitative trading industry.
Currently, apart from Bitcoin, many altcoins in the crypto market have become highly homogeneous, significantly reducing their long-term holding value. If the industry can introduce yield-generating assets and promote real-world asset tokenization, it would create substantial value. Although this direction may not appear as “exciting” as some previous narratives, it could represent a clearer path for industry development and generate more trading opportunities.
David | Yohalpha Capital: Another potential direction is leveraging the AI trend. Whether it is AI Agents or Web3, economic interactions will likely increasingly rely on blockchain-based channels rather than relying entirely on traditional banking systems.
However, the current market enthusiasm for AI hardware is significantly stronger than for AI software. Software companies may only capture a limited share of the benefits and could even face pressure. The areas with stronger growth potential may still be hardware-related sectors, such as computing power infrastructure and integration with real-world industries.
If the current AI wave loses momentum, whether the industry can continue developing independently afterward remains to be seen. At present, the risk level in the AI sector is already very high, and the market may have a clearer answer by next year.
JZL Capital’s arbitrage products (such as Little J — Arbitrage2) won the “Best Risk Control Award” at the Digital Quant 2026 Global Digital Asset Quantitative Trading Competition due to their outstanding drawdown management capabilities.
Could you briefly introduce the core strategy types used by the JZL team during this 60-day live trading competition? What type of market environment are these strategies best suited for? Could you also share some examples from the competition period?
Nathan | JZL Capital Quantitative Lead: We participated in the competition with three products: two arbitrage products and one long-short product.
The arbitrage strategies mainly focus on spread trading between futures and spot markets on a single exchange. The core logic is that when a significant price difference appears between futures and spot markets of the same asset, we short the relatively overpriced asset while buying the relatively underpriced asset, waiting for the spread to converge and then closing the positions to capture the arbitrage profit.
Another source of return comes from funding rates in perpetual contracts. The reason this strategy maintains low drawdowns is that it adopts a 100% market-neutral approach.
We maintain strict control over trading activities and the assets we hold, which allows the overall product drawdown to remain extremely low.
High-volatility markets are environments we prefer. Whether the market experiences sharp rallies, steep declines, sustained upward trends, or prolonged downward movements, these conditions can provide opportunities. In terms of returns, a sustained upward trend is generally more favorable because it can generate higher funding rates.
During prolonged market declines, funding rates are usually negative, requiring us to implement short spot positions. However, exchanges often impose more restrictions on such operations, limiting capital capacity in these market conditions.
Overall, the market environment we least prefer is one with extremely low volatility.
Regarding the sudden market decline on the evening of June 24, how did your trading strategies respond and capture opportunities? During sharp sell-offs, many strategies can suffer from liquidation risks, slippage, or sudden liquidity disappearance. Do you have dedicated mechanisms for order execution and emergency risk control to handle such extreme market conditions?
Nathan | JZL Capital Quantitative Lead: We actually welcome this type of market environment. Our trading strategies mainly capture spread opportunities created by high volatility. For example, during last night’s decline, the futures market likely fell at a slower pace than the spot market, allowing us to capture returns from the price spread between futures and spot markets.
For our strategies, both sharp rallies and sharp declines can create valuable trading opportunities. At the execution level, we have multiple mechanisms in place, including exchange-provided post-only order functions to reduce slippage risk.
Our trading system makes extensive use of various data provided by exchanges. These data allow us to obtain the latest market conditions efficiently and optimize network performance to submit orders as quickly as possible.
During extreme downward movements, exchange disruptions, or latency issues, we adjust our order execution strategies based on factors such as order success rates and slippage levels.
When it comes to capturing price opportunities, we focus more on trend-following or trend-reversal strategies, as these approaches are more effective in identifying opportunities during such market conditions. For example, during a sharp drop to around $59,000 yesterday, many traders were likely waiting to buy at that level, which helped trigger a rapid rebound.
Could you summarize the core strategy types of the Yohalpha Capital team? Did you make any adjustments to your strategies during the competition? If so, what signals drove those changes?
Jay | Yohalpha Capital: The competition strategy was based on a single CeFi cash-and-carry arbitrage strategy, while also capturing part of the funding rate returns. Funding rate income accounted for approximately 60%–70% of total returns, with the remaining 30%+ coming from basis trading.
We held a relatively cautious view on the overall 2026 market environment. With liquidity becoming increasingly constrained, traditional trend-following strategies and strategies with directional exposure have shown weaker stability under current market conditions.
Throughout the competition period, we did not make any major strategic adjustments. From the first day of deployment until the final settlement, we maintained the same trading logic.
Our strategy is designed to operate across different market cycles and adapt to various market environments. During the macro liquidity shock in October 2025, the strategy demonstrated strong resilience and generated significant returns. When the market experienced sharp volatility in early June, it actually created more opportunities for arbitrage strategies, as futures spreads widened and further enhanced funding rate-related returns.
How did you respond to the “10.11” risk event last year?
Jay | Yohalpha Capital: At around 3:40 AM on October 11, the exchange experienced an order placement failure, and the short-side accounts triggered ADL (Auto-Deleveraging). However, our automated risk control system had already been activated simultaneously, automatically alerting traders, portfolio managers, and core team members. Everyone was fully engaged within just a few minutes.
We determined that the ADL trigger occurred during the final stage of the accelerated market decline. Throughout the process, our leverage ratio remained within a safe range, and the market quickly rebounded after the ADL event. The team manually intervened to close our long positions, and no additional risk exposure was created during the entire process.
After the event, we conducted a major upgrade to our ADL monitoring module. In March this year, Binance introduced a counterparty trader management mechanism designed to hedge ADL risks. Going forward, this type of ADL risk issue is unlikely to occur again, at least on the Binance platform.
Are your positions mainly focused on large-cap assets or smaller tokens?
Jay | Yohalpha Capital: We select assets based on factors including price spreads, liquidity, and market capitalization. The maximum exposure to any single token is controlled below 0.05%, with highly diversified positions.
Our risk management system has incorporated scenarios involving abnormal spreads in smaller-cap tokens. We maintain a large number of positions across different assets, ensuring a high degree of diversification.
Initially, the competition rules only allowed trading of the Top 100 tokens by market capitalization rankings from CoinMarketCap and CoinGecko. Later, the rules were expanded to allow trading of all tokens, while on-chain assets remained limited to the Top 100 to prevent artificial liquidity pools and price manipulation in smaller tokens.
Jay | Yohalpha Capital: Cross-exchange arbitrage exposed many issues last year, while single-exchange arbitrage strategies demonstrated relatively stronger stability. After October, some teams achieved significant returns through on-chain DEX strategies while also benefiting from trading incentives provided by centralized exchanges.
Before October, on-chain trading activity was higher than centralized exchanges. Various tokens emerged rapidly, with many having low market capitalization and insufficient liquidity, making them vulnerable to artificially created liquidity pools. Many users were trading with small orders of only 100U, 5U, or 10U.
David | Yohalpha Capital: On-chain trading is indeed difficult to regulate.
The next competition will introduce on-chain trading access. Platforms such as Hyperliquid, Drift, and Polymarket have gained significant attention in on-chain trading, and many ETF-related trades have already moved to Hyperliquid. This year, most teams focused on centralized exchanges, while next year on-chain trading will officially be included. How will you allocate capital between on-chain and centralized exchange strategies in the future? How do you view on-chain trading?
Currently, mainstream strategies are mainly deployed on mature centralized exchanges. Our future development plan is centered around arbitrage strategies on leading exchanges. We will first establish a foundational capital pool, then add statistical arbitrage strategies to further enhance returns.
Jay | Yohalpha Capital: High-frequency strategies have advantages on certain blockchains, enabling cross-asset arbitrage opportunities or directional basis trading based on on-chain signals.
The allocation ratio between different strategies has not yet been finalized. We need to first evaluate capital efficiency and market conditions. The capital efficiency of implementing the same basis trading strategy across different exchanges can vary significantly.
Rather than directly setting fixed capital allocations for each exchange, we prefer to determine allocations based on a risk-parity framework. We evaluate the amount of capital required to achieve equivalent trading efficiency and then determine the appropriate allocation ratio.
High-frequency strategies allow capital to be withdrawn quickly when needed. Meanwhile, smaller exchanges carry counterparty risks, so their allocation ratios need to be finalized through further live trading tests.
From a capital security perspective, centralized exchanges currently carry relatively lower overall risks. The on-chain sector still faces many uncertainties and remains in an early stage of development, but it represents a long-term trend. Platforms such as Hyperliquid and Polymarket are representative examples of the decentralized trading ecosystem.
Major exchanges are now opening access to U.S. stock trading channels, and TradeFi has become a popular narrative. In the future, how will your team balance and adjust its focus between traditional financial markets and crypto markets?
Jay | Yohalpha Capital: Our team originally transitioned from the traditional quantitative finance field, and we have retained the strategies and experience accumulated from traditional markets. We focus on whichever market provides better opportunities.
Over the past two years, China’s A-share market has experienced a strong bull market, creating attractive opportunities with relatively low capital costs. Corporate lending rates are just slightly above 1% annually, while deposit interest rates remain below 1%. Our team currently has live A-share strategies running, which helps achieve diversified asset allocation, improve overall risk resilience, and optimize various risk metrics.
In summary, we allocate resources to markets where profitability is more accessible and capital costs are lower.
Jason | JZL Capital Market Lead: Our business mainly consists of two areas. The crypto quantitative trading strategies managed by Nathan are our primary approach for market-oriented cooperation.
For our proprietary capital, since the launch of IBIT, we have converted part of our Bitcoin holdings into IBIT exposure through a diversified allocation approach. In addition, we have allocated some of our crypto trading profits into U.S. technology stocks.
As TradeFi connects U.S. equities and crypto markets, cross-market capital flows and sentiment transmission have become faster. Does this create more opportunities or more risks for crypto quantitative trading?
Nathan | JZL Capital Quantitative Lead: I believe it creates more opportunities.
As TradeFi enters the crypto market, whether through spot products or derivatives, it will attract more participants and increase overall market trading volume. This will create more arbitrage opportunities and expand the range of tradable assets.
For crypto-native assets such as MEME coins and altcoins, however, I believe the impact could be relatively significant. The overall liquidity of the crypto market remains limited. As TradeFi capital flows in, investors may naturally develop stronger demand for high-quality assets such as U.S. equities, potentially reducing trading interest in smaller altcoins.
But for quantitative trading teams, this represents more opportunities rather than fewer.
What are the biggest differences between strategies used in traditional financial markets and those used in crypto markets?
Jay | Yohalpha Capital: The first difference lies in market maturity and regulatory orientation. The second is the difference in market participants and the functions of regulatory institutions.
Traditional financial markets have sovereign credit backing, while the crypto market operates in a much more flexible and open environment. Another significant difference is that traditional markets, especially the A-share market, have relatively limited hedging derivatives and a slower pace of introducing new instruments. In contrast, the crypto market offers a wide range of derivatives products, making it easier to optimize and refine trading strategies.
David | Yohalpha Capital: Traditional financial markets are enormous in scale, and different traditional markets share relatively few common characteristics. Compared with the crypto market, the biggest common difference lies in regulation.
Traditional markets, whether domestic markets or the U.S. market, have established credit support mechanisms. However, crypto assets, whether traded on-chain or through exchanges, do not have any entity providing such guarantees. Governments around the world do not link crypto assets with sovereign credit. This represents the fundamental difference between crypto assets and all traditional assets.
The more specific differences between crypto assets and various traditional asset classes are mainly reflected at the technological and structural level. Compared with equities, the crypto market has a much smaller cross-section of assets. Compared with commodities, crypto assets generally exhibit much higher correlations between different tokens.
Looking back at financial history, we can see that the early stages of traditional financial markets were not fundamentally different from the current state of the crypto market. Every market goes through a period of rapid and relatively unregulated growth.
In the U.S. stock market during the 1920s and 1930s, Richard Wyckoff’s theories of accumulation, markup, distribution, and markdown were highly applicable. The market was filled with well-known market operators and speculative capital, while regulatory frameworks were still underdeveloped.
The early stage of China’s capital market followed a similar path. During the 1995 Wanguo Securities incident, related operations completely bypassed exchange risk control systems, and margin verification mechanisms were effectively ineffective.
Today, some crypto exchanges also face similar issues. Certain whitelist institutions or individuals may place orders without undergoing sufficient risk checks or providing adequate margin collateral, theoretically creating unlimited losses.
During the 1990s Treasury Bond 327 incident, a risk exposure of more than RMB 400 billion was created within a single trading day, without any effective risk controls in place. The underlying physical supply of government bonds in circulation was even insufficient to cover the corresponding positions.
This became one of the most damaging events in China’s securities market history. Regulators ultimately canceled the final eight minutes of trading records, and individuals responsible for the short positions were sentenced to 17 years in prison.
From a conventional perspective, canceling trades instead of acknowledging regulatory and legal shortcomings could damage market credibility even further. However, at that time, there were no better alternatives. If normal settlement had proceeded, the total amount of tradable government bonds nationwide would not have been sufficient to fulfill the outstanding positions.
After this event, a series of supporting regulations, market manipulation rules, and retail investor protection mechanisms were gradually introduced, while China’s treasury bond futures pilot program was suspended.
The crypto industry will likely experience a similar evolution process. Over time, the differences between crypto markets and traditional financial markets will continue to narrow, and crypto assets may eventually develop into a special category of standardized commodities.
How do you view the rapid growth of on-chain derivatives DEX market share? How do you plan to adjust the capital allocation ratio between CEX and DEX strategies?
David | Yohalpha Capital:On-chain trading is a long-term trend. The issue of exchange customer loss mechanisms has been widely criticized by the market. On-chain models can at least avoid some of these problems at a structural level, although their degree of decentralization remains relatively limited.
As the industry continues to mature and entry barriers rise, the on-chain sector has become a place where cutting-edge technologies can be implemented. Many current participants entering the on-chain space come from high-frequency quantitative trading firms or have backgrounds from top U.S. universities. They are able to integrate and apply the latest distributed computing technologies, which is one of the reasons why the on-chain sector has gained significant recognition within the industry.
If centralized trading platforms can obtain sovereign credit backing within a compliant legal framework and establish more complete regulatory systems, they may develop along a differentiated path from DeFi. The two models will not completely replace each other.
For ordinary retail investors, participating in on-chain trading remains relatively complex, and financial products such as ETFs are unlikely to be fully replaced by on-chain markets.
At the current stage, our team continues to focus primarily on strategies deployed on centralized exchanges. Going forward, we will place greater emphasis on evaluating capital efficiency across different exchanges and use risk-parity models to guide capital allocation decisions.
Jason | JZL Capital Market Lead: Due to the complexity of managing on-chain wallets, our proprietary capital has not been deployed extensively in DEX trading. We have only participated in some relatively simple pool staking activities and a few airdrop farming opportunities.
Nathan | JZL Capital Quantitative Lead: I do not think DEX and CEX are in absolute competition with each other, because using a CEX and using a DEX represent two completely different user experiences and serve different groups of participants.
For DEXs, many of the popular projects currently attracting attention are not necessarily drawing users from the core CEX user base. I believe this group mainly consists of speculative traders, who may move back and forth between different markets.
Therefore, I believe the rise of DEXs is ultimately positive for the entire industry and does not represent a fundamental threat to CEX platforms.
At the moment, we are actively observing quantitative opportunities in DEX markets. Platforms such as Hyperliquid and Polymarket may contain significant arbitrage opportunities, with potentially large spreads available.
However, due to the challenges of wallet management and operational complexity, we are currently still in the observation phase.
Regarding TradeFi and Hyperliquid, will your team invest more resources in these areas in the future? Based on the competition data, institutional teams generally did not make strategy choices based on capital size. How do you view this phenomenon?
Nathan | JZL Capital Quantitative Lead: If there are enough LPs willing to allocate capital to this market, we would also invest more resources into DEX strategies. From the perspective of participating in the competition, our goal was to showcase the strengths and characteristics of our team, so we chose the strategies we are most experienced in and most confident with.
In this competition, some teams used AI Agents for fully autonomous trading, which is currently one of the hottest topics in the quantitative trading industry. Within JZL’s current strategy framework, what is the approximate level of AI and machine learning adoption? In which areas are they mainly applied, such as signal generation, risk management, order execution, or market analysis?
Nathan | JZL Capital Quantitative Lead: We are actively researching and exploring applications internally.
In terms of AI, we mainly use some coding assistance tools, such as Codex and Copilot, to support our software development and improve coding efficiency. In addition, we use AI for certain operational tasks, such as analyzing daily trading reports, trading logs, and transaction records to identify potential issues.
Previously, these processes relied heavily on manual analysis and calculations. With AI assistance, the speed and efficiency have improved significantly.
Beyond that, we also use Agents to collect market sentiment data, including information from platforms such as Twitter, and generate relevant factors to support trading decisions made by other teams.
Many teams are now focusing heavily on AI-driven quantitative trading. Do you think this could lead to highly similar strategies across the industry and create the risk of collective liquidation during market volatility?
Nathan | JZL Capital Quantitative Lead: For AI, hallucinations or execution deviations are the most critical risks. We have always been cautious about allowing AI to directly execute orders or conduct trading activities, mainly because AI may generate inaccurate decisions or perform actions beyond its authorized scope.
However, I believe AI represents a new approach to strategy research and development. It can significantly reduce the gap between professional institutions and individual participants. Overall, I think this is a positive development and an important boost for the industry.
Jason | JZL Capital Market Lead: At the current stage, we prefer to use AI Agents for research, risk management, and trading assistance rather than granting them full trading permissions immediately.
Different Agents can take responsibility for different areas, including strategy development, market research, risk control, and execution. However, live trading should still maintain permission hierarchies, risk thresholds, account isolation mechanisms, and human rule-based verification.
Trading permissions should gradually evolve from providing signal recommendations, to small-scale execution, and eventually toward higher levels of automation.
What do you think will be the future direction of AI and crypto integration? Beyond crypto, will the team consider trading U.S. equities through exchanges such as Binance, Bybit, Gate, or OKX?
Jason | JZL Capital Market Lead: We currently have exposure to both crypto and U.S. equities. On the U.S. equity side, we mainly focus on spot trading through traditional brokers, while crypto is primarily used for derivatives, funding rate arbitrage, and cross-market hedging.
In the short term, one of our key focuses is arbitrage opportunities between traditional markets and crypto markets. For example, holding spot positions in U.S. equities while taking corresponding short positions in crypto derivatives markets to capture high funding rates.
However, such strategies require careful management of factors including U.S. stock market trading hours, 24/7 crypto volatility, liquidity conditions, slippage, and basis risks.
Therefore, our preference is to keep core U.S. equity positions with traditional brokers such as Interactive Brokers, while using crypto exchanges mainly for derivatives hedging, funding rate arbitrage, and 24-hour risk management.
Jay | Yohalpha Capital: AI is a sector that the crypto industry must invest in. Decentralized AI computing infrastructure and related applications may become a major catalyst for the next wave of industry growth.
Our team actively embraces AI. We use AI not only for code assistance, but also for analyzing market data, extracting trading logic, and incorporating insights into quantitative strategies. AI has already become a daily productivity tool for our team.
We will definitely conduct trading activities involving U.S. equities and A-share-related assets on leading mainstream exchanges. Top centralized exchanges have been deeply involved in the industry for years, and we have a strong understanding of their trading rules, contract APIs, and asset structures. We will continue expanding in these areas.
For emerging trading platforms, we will mainly evaluate user composition and profit potential. As long as the platform is compliant, stable, and has long-term growth potential, we are willing to invest resources and build capabilities there.
David | Yohalpha Capital: In the early stages of the market, inefficiencies were significant. Our core business initially focused on cross-exchange arbitrage — the traditional approach was to collect market data and capture price differences between exchanges. At that stage, we contributed to improving market efficiency.
However, the market has evolved extremely quickly. Changes can be clearly observed even within weekly cycles. In recent weeks, market inefficiencies have declined significantly, spreads between exchanges have gradually narrowed, and pricing has become more balanced.
As liquidity improves, the market structure will increasingly resemble traditional securities markets. At that stage, we can reuse multi-exchange trading algorithms originally developed for traditional U.S. equity markets.
From a microstructure perspective, there are now corresponding U.S. equity-related synthetic markets during weekends, creating weekend trading opportunities. Prices may sometimes fluctuate based on news events, while other times there may be malicious price spikes designed to trigger stop losses. These situations can create small but consistent profit opportunities.
There are also opportunities around IPOs. For certain assets, pre-IPO markets exist before official listings, allowing participants to capture returns of around 10%.
For purely speculative markets and random volatility driven by retail participants, traditional technical indicators can remain highly effective. A single indicator can potentially generate daily returns of several basis points.
Once an asset officially lists, however, price movements become fully anchored to the underlying stock, and the market behavior differs significantly from the pre-IPO stage.
The interaction between traditional markets and crypto markets will create many new opportunities. For quantitative teams, especially smaller proprietary trading firms with relatively flexible compliance structures, there are many potential opportunities worth exploring. We will continue monitoring and expanding in these areas.
Would you consider security risks? Exchanges themselves may create artificial liquidity or conduct volume manipulation, while regulation is not yet as comprehensive as in traditional brokerage markets.
David | Yohalpha Capital: Professional traditional U.S. equity traders usually place greater emphasis on compliance issues. They also believe that crypto markets often lack sufficient order book depth and may carry capital loss risks.
However, within proprietary trading, there are still many profitable opportunities.
Jay and I have been involved in traditional finance for a long time, although we have spent relatively less time in the crypto market. If we move into institutional services or asset management, larger capital sizes would face liquidity constraints, and compliance requirements would also become a major consideration.
As long as an opportunity is part of profitable proprietary trading, we are willing to participate. Asset management is a different matter.
The return opportunities in these areas are usually relatively small, and they require a higher risk tolerance.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
