Investigated crypto funding carry (researchers' flagged retail path to >1 Sharpe). DELTA-NEUTRAL
cash-and-carry (short perp+long spot, collect funding, price cancels) -- different from the
directional carry trap. Funding positive 75pct of time. Backtest net of cost: APR 9.9pct, raw
Sharpe +5.68, maxDD -7.4pct, survives to 20bp cost, worst month -1.5pct (delta-neutral held).
Discipline finds: (1) real; (2) 5.68 inflated (funding-only model, 1.8pct vol; real basis vol
-> honest ~2-3 Sharpe = literature's 1.5-2.5); (3) regime-dependent + DECAYING (negative 2022,
2025, 2026). Caveats: counterparty/exchange tail (FTX -100pct, not in backtest = real killer),
decay, operationally real. The ONE genuine path past the 0.7 ceiling -- but it's crypto +
counterparty tail is the price of admission. The journey converges: higher Sharpe exists,
reachable, but lives where the user didn't want to go with a tail the Sharpe doesn't show.
Co-Authored-By: Claude Opus 4.8 (1M context) <noreply@anthropic.com>
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