HYPE vs Solana: The Pair Trading Strategy Delivering 4x Higher Returns

Crypto analyst Trevor Flipper shared a strong view that HYPE still has room to rise. But his main point was not simply about being bullish. Instead, he highlighted how most traders structure their bets in a way that exposes them to unnecessary risk.

Many people on Crypto Twitter tend to think that one asset will perform better than another. However, instead of trading on the difference, they simply end up buying the asset they prefer.

This tends to expose them to high levels of volatility, sharp wicks, and stop-outs that are not even related to the original idea. According to Flipper, the problem is not always related to timing or leverage.

The problem is the structure itself. A long position will expose them to full market movements regardless of whether they are right about the asset that is stronger.

Also Read: Solana Treasury Stock Jumps 17% on Staked SOL Loans

HYPE/SOL Case Study Shows Cleaner Performance

To prove this, Flipper constructed a case for HYPE vs Solana using the HYPE/SOL pair. This pair trade has been quite popular in some form for most of the last year. The data produced an interesting result.

Although HYPE is still 40% below its all-time high, the HYPE/SOL pair is currently at an all-time high. Solana is also below its peak, but the pair only recorded the relative strength between the two.

Source: X

This was the crucial benefit. The trade did not care if Bitcoin was at 60,000 or 120,000. It simply hinged on whether Hyperliquid was beating Solana.

Flipper explained that if the underlying assumption was right, the pair position rewarded this assumption without requiring traders to go through the entire market’s downturns.

Sharpe Ratio Improves as Risk Drops in Bear Markets

Over almost a year, the HYPE/SOL pair achieved a Sharpe ratio of 1.45, which was “institutional quality,” according to Flipper. A trader with only the long position in HYPE, even with the correct idea, would have achieved a Sharpe ratio of 0.35.

The pair trade also decreased the maximum drawdown from -64% to -45% and volatility by 21%. With only the addition of one short leg in the Solana trade, the risk-adjusted returns were now almost four times better.

Source: X

According to Flipper, this change in positioning was due to frustration with being right on the fundamental side of things but still being hurt in market downturns. Pair trading, he says, strips away the market noise from the alpha.

He also proposed that as the crypto market evolves, this strategy could prove even more valuable in the future, particularly as the weaker projects are weeded out, and the better players expand into trillion-dollar companies.

Looking forward, the strategy that Flipper has in mind is to expand this framework into multi-asset basket trades. The preliminary data indicate that volatility could decrease even further, from 104% in naked trades to 82% in pairs and even 57% in baskets, with Sharpe ratios increasing to 1.80.

Also Read: Solana RWA Ecosystem Hits $1.66B While SOL Battles $90 Resistance