47 lines
2.5 KiB
Markdown
47 lines
2.5 KiB
Markdown
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# VIOLET Research TODO — Why does the IRP pick stablecoins when unguarded?
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**Status:** Research TODO (logged 2026-06-14). Low priority, high curiosity. Not blocking.
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## Observation
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The VIOLET shadow soak, running BLUE's muted-IRP gold config (`min_irp_alignment=0.0`)
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WITHOUT BLUE's stablecoin exclusion gate, repeatedly ranked **USDCUSDT** top and would
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have shorted it at full conviction (9.0). BLUE hardcodes these out
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(`_STABLECOIN_SYMBOLS`, nautilus_event_trader.py:24/3906 — "must never be traded"), and
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VIOLET now replicates that (commit V3.1). So in production it's correctly excluded.
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## The question
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**Why does the IRP ranker select stablecoins when unguarded — and is the exclusion
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leaving a real (small, desirable-to-forgo) edge on the table?**
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Two hypotheses:
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1. **Noise/artifact.** Stablecoin price series are near-flat; the IRP efficiency/ARS
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metric may divide by a tiny denominator (low realized vol), inflating the score on
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essentially flat micro-movements → a spurious "clean signal." If so, exclusion is pure
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correctness (avoids dividing-by-near-zero noise).
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2. **Real micro-edge, deliberately self-limited.** Stablecoin depeg oscillations
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(USDC/USDT wobbling around \$1) are mean-reverting and genuinely tradeable at tiny
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size — the IRP may be detecting a real, low-volatility, low-risk signal. BLUE's
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exclusion would then be forgoing a small but real edge BY DESIGN (correctly — pegged
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assets carry depeg tail risk, poor borrow, regulatory/operational hazards that dwarf
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the micro-edge; not worth it).
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## How to settle it (when researched)
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- Backtest the EXCLUDED stablecoin picks as if traded (small size): realized PnL,
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Sharpe, max depeg drawdown, borrow/funding cost. Does the micro-edge survive costs +
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the depeg tail?
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- Inspect the IRP ARS/efficiency computation on flat series (rank_assets_irp_nb): is the
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high score a denominator artifact (hypothesis 1) or a real efficiency signal (2)?
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- Cross-check against the dual-leverage/conviction the sizer assigns (it gave conviction
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9 on USDC vel_div −0.0585 — is that vel_div itself an artifact of a flat series?).
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## Why it matters (mildly)
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If hypothesis 2 holds, it informs whether a *separate, tiny-size, depeg-aware*
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stablecoin strategy could be a future color — orthogonal to BLUE's directional short
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edge. If hypothesis 1, it's just confirmation the exclusion is correctness. Either way,
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VIOLET keeps the exclusion (follow BLUE). See
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[[blue_margin_envelope_study]], [[violet_v3_alpha_doctrine]] (#12 follow-BLUE).
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