Can AI Traders Beat Crypto's Wild Swings with Pair Trading?

Pair trading—betting that two correlated assets will realign—works in stocks but breaks down in crypto's extreme volatility. The authors built an AI system using reinforcement learning (PPO with memory layers) to decide when to enter and exit trades within strict risk guardrails. Testing on Binance hourly data showed the AI beat heuristic baselines with 10% statistical significance, suggesting AI execution can stabilize the strategy where rigid rules fail—though the result falls short of 5% confidence, a reminder that crypto's chaos still defeats most trading schemes.