Cryptocurrencies trading using Parrondo’s Paradox

Abstract

Cryptocurrencies market capitalization has surpassed $4 trillion in 2025, attracting individual and institutional traders seeking investment and speculation. However, volatility of cryptocurrencies prices makes profitable strategies a huge challenge, especially with respect to the variance of returns. In this context, this paper presents an innovative strategy based on the counterintuitive concept from Game Theory called Parrondo’s Paradox. The presented strategy results in improved capital gains (returns) when compared to traditional buy & hold. Also, the strategy is proven to work in daily, weekly and minute-by-minute timeframes. With the empirical results shown in this paper, the Parrondo’s Paradox framework can be used as a trading strategy by either individual or institutional investors.