There is alpha in choosing where to play; and there is SURELY alpha...
sysls@systematicls
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Nov 27, 2025
~1 min read
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There is alpha in choosing where to play; and there is SURELY alpha in these new frontier markets.
Market efficiency isn't some fixed property of an asset class. It's a ratio.
Specifically: how much sophisticated capital is deployed relative to unsophisticated capital.
Crypto? Most wallets are retail. Institutions hold a fraction of Bitcoin supply. The market is structurally soft.
Forex retail? Most traders lose money per mandatory ESMA broker disclosures. The 90-90-90 rule exists for a reason (90% lose 90% of their account in 90 days). The counterparties are... not good. It starts with X and ends with TX.
US large-cap equities? Institutions own a large majority of the S&P 500. Every tick is being watched by Renaissance, Two Sigma, Citadel, and 47 PhD quants who've already modeled your strategy. The table is hard.
This is why alpha decay happens faster in some markets than others. In crowded institutional markets, even large inefficiencies can get arbitraged away in hours.
Goldman's latest report literally cites "crowding in positions" as a current headwind for hedge fund returns. Meanwhile in crypto, you're trading against people who think market making is a new concept and quoting wide is alpha. Cue Polymarket influenzas.
The sports betting world figured this out decades ago. Only 3-5% of bettors are profitable long-term. "Soft" sportsbooks limit or ban sharp bettors. "Sharp" books welcome them because they need someone to make prices efficient.
The edge is at the soft book.
You're measuring your edge against the marginal trader, not against some platonic ideal of "the market." This is why small quant shops sometimes outperform despite having worse tech, less data, and fewer researchers.
They're fishing in ponds the big funds can't fit into. Table selection isn't just a poker concept. It's a portfolio construction decision.
Market efficiency isn't some fixed property of an asset class. It's a ratio.
Specifically: how much sophisticated capital is deployed relative to unsophisticated capital.
Crypto? Most wallets are retail. Institutions hold a fraction of Bitcoin supply. The market is structurally soft.
Forex retail? Most traders lose money per mandatory ESMA broker disclosures. The 90-90-90 rule exists for a reason (90% lose 90% of their account in 90 days). The counterparties are... not good. It starts with X and ends with TX.
US large-cap equities? Institutions own a large majority of the S&P 500. Every tick is being watched by Renaissance, Two Sigma, Citadel, and 47 PhD quants who've already modeled your strategy. The table is hard.
This is why alpha decay happens faster in some markets than others. In crowded institutional markets, even large inefficiencies can get arbitraged away in hours.
Goldman's latest report literally cites "crowding in positions" as a current headwind for hedge fund returns. Meanwhile in crypto, you're trading against people who think market making is a new concept and quoting wide is alpha. Cue Polymarket influenzas.
The sports betting world figured this out decades ago. Only 3-5% of bettors are profitable long-term. "Soft" sportsbooks limit or ban sharp bettors. "Sharp" books welcome them because they need someone to make prices efficient.
The edge is at the soft book.
You're measuring your edge against the marginal trader, not against some platonic ideal of "the market." This is why small quant shops sometimes outperform despite having worse tech, less data, and fewer researchers.
They're fishing in ponds the big funds can't fit into. Table selection isn't just a poker concept. It's a portfolio construction decision.
