A crypto trading research project — and an honest record of what happened when I tested it for a real edge.

It started as an AI-driven directional bot: deterministic market features → LLM trade suggestions → a multi-gate risk engine → paper/live execution. Then I did the thing most trading projects skip: I tried, rigorously, to disprove that it made money. It didn't. So I kept testing — pairs, stat-arb, cross-exchange — and disproved those too. One strategy survived: a delta-neutral funding carry on high-consistency altcoin perpetuals.

This repo contains both halves: the full directional bot (which has no edge, and I can show you why) and the carry strategy (which has a real, structural, but small edge). The whole point is the methodology — see docs/METHODOLOGY.md.

Read DISCLAIMER.md first. Educational/research only. Not financial advice. Paper by default. Trading risks total loss. As published, the carry edge is backtested and paper-tested, not proven over a long live track record.

The one-paragraph summary

Most "edges" are illusions that vanish once you account for real costs or test out-of-sample. The directional bot's mechanical signal was +0.035R gross but −0.243R after realistic slippage and fees. The LLM layer (Cerebras and Gemini, tested on a gated replay) did not beat break-even. Pairs/stat-arb was overfit — every pair that looked good in-sample reversed out-of-sample. Cross-exchange funding differences were already arbitraged to ~0.4%/yr. The only thing that held up under honest cost accounting was harvesting funding on perpetuals that are structurally hard to short, where longs persistently pay shorts. Held delta-neutral (long spot + short perp), that pays roughly 10–20%/yr, market-neutral, with a hard capacity ceiling around $100k.

Architecture

The carry strategy is deliberately split into a pure, unit-tested core (scoring, sizing, accounting, scheduling) and a thin network/time layer (price fetch, the loop). That's why it's testable and restart-safe.

Quick start (paper)

Requires Python 3.12+.

git clone https://github.com/blitzcrieg1/sentinel-trader-research.git
cd sentinel-trader-research

python -m venv .venv
# Windows:  .\.venv\Scripts\Activate.ps1
# Linux/macOS:  source .venv/bin/activate

pip install -e .
cp .env.example .env   # defaults are paper-safe

Run the carry strategy (paper, no exchange keys needed — public data only):

python -m sentinel.carry.run --capital 10000 --state data/carry_book.json -v

It scans MEXC perpetuals, curates a basket by funding consistency, opens simulated delta-neutral hedges, accrues funding every 8h (00/08/16 UTC), and persists the book so it survives restarts. Add TELEGRAM_BOT_TOKEN + TELEGRAM_ADMIN_CHAT_ID to .env for 8-hourly reports (optional).

Run the directional bot (paper):

It needs an LLM key (GEMINI_API_KEY) and uses dummy MEXC keys for paper. It works — it just doesn't have an edge. That's the point.

Tests

pytest          # carry core: scoring, sizing, delta-neutral accounting, persistence
ruff check .
mypy sentinel/

Validate the edge yourself (walk-forward, OOS)

The sharpest objection to a consistency-screened basket is survivorship/look-ahead bias. sentinel/carry/walkforward.py confronts it: at each rebalance the basket is picked on past-only data, scored on the next, unseen window, then bootstrapped into a 95% CI and compared to a random-selection baseline.

python -m sentinel.carry.walkforward --scan --train 600 --test 120 --top-n 6 -v

If the edge only existed in hindsight, the out-of-sample yield collapses to the baseline and the CI straddles zero. The no-look-ahead property is unit-tested. See docs/METHODOLOGY.md §5.5.

And because capacity is the whole story for a thin-market edge, capacity.py turns the "~$100k ceiling" into a net-yield-vs-notional curve (square-root market impact + participation cap + a sensitivity band):

python -m sentinel.carry.capacity --symbol XMR_USDT -v

Deployment

Linux + systemd. Units are in deploy/ — sentinel-carry.service (the strategy) and sentinel-trader.service (the directional bot). Both run fine on a small always-on box (a Raspberry Pi or a cheap mini PC). The carry book uses atomic writes and SQLite uses WAL, so a power loss won't corrupt state.

What this project is — and isn't

• It is an honest, end-to-end study of whether a retail crypto edge exists, with the code to reproduce every finding.
• It is a working, market-neutral carry harvester with a structural reason to work and modest, capacity-limited returns.
• It is not a way to get rich from a small stake. A ~15% market-neutral return is excellent — but 15% of a small number is a small number. At small capital, your savings rate matters far more than any strategy's return.
• It is not financial advice or a turnkey money machine. See DISCLAIMER.md.

Related work — and how this differs

Funding carry is not new, and this repo doesn't claim to have discovered it. It's one of the most replicated ideas in crypto, and the structural reason it works is well documented — a BitMEX study found funding is positive ~92% of the time. There are many implementations:

• Execution / detection bots — e.g. aoki-h-jp/funding-rate-arbitrage, ARBOT, HL-Delta. These detect funding opportunities and run the delta-neutral trade. They're useful — but they're execution engines: none ship walk-forward validation, an out-of-sample permutation/selection-bias guard, or a capacity curve.
• Academic — e.g. a leveraged BTC carry study (~16%/yr, Sharpe 6.1). Rigorous, but single-asset and theoretical.
• Honest "AI bot" writeups — e.g. Jiri Dolejs' LLM trading bot, which independently reaches the same conclusion about LLM signals that §2 does.

What this repo adds is not the strategy — it's the discipline around it:

1. A documented disproof of the strategies that don't survive (directional, LLM, pairs, cross-exchange), so the carry isn't presented in a vacuum.
2. A validation layer the execution bots skip — walk-forward + bootstrap, a permutation test for selection bias, and a capacity curve, all runnable.
3. Honest limitations (METHODOLOGY §6), including the parts that are unproven or only operationally mitigable.

The edge is the crowded part; the rigor and the candor are the point.

Built and tested in paper. The hardest and most valuable result here was learning to disprove my own ideas with data.