Tutors who teach courses on pair trading generally recommend finding instruments that have some fundamental relationship, are ‘in the same business’ so to speak, as these will provide a greater chance of being cointegrated and staying that way.
Achal, an Indian guy who discusses this on a course on Udemy (course on Pinescript) uses shares in two major Indian automotive manufactures as his example. The first guy I encountered on this subject, also on Udemy, was comparing Australian, Canadian and South African commodity ETFs. People on Quantra often use a Gold ETF vs a Gold Miners ETF as an example.
So what kind of segmentation is there in the crypto space? I must admit I’ve never really looked closely at this, as development of actual use cases has always seemed a way off. But I am aware of some. There are several forks of BTC for example, although I don’t want to use BTC itself as one of my pair instruments for broader tax reasons. Smart contract platforms? I guess that includes Ethereum and Cardano, amongst others. Oracles? I held LINK for quite a while, now there’s also iExec and BAND I think. DeFi? That seems pretty big and I must admit I haven’t really looked into it too much. Plus I’ve heard of Layer 1 and Layer 2 solutions, not too sure what those are.
A while back I used Unsupervised Learning to identify clusters amongst various coins without too much success. I did identify some clusters, but couldn’t find any pairs within a cluster worth trading from a cointegration point of view. Maybe this is another area where the whole crypto space needs time to become more mature. As I’ve mentioned before, it’s still pretty much the wild west.