Between buy and hold and market neutral: understanding semi-neutral strategies

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Anyone who invests in cryptoassets sooner or later ends up faced with the same choice.

First option, buy and hold: buy and hold. In the long term, the strategy has often paid off well, but at the cost of brutal declines. Since its creation, bitcoin has experienced several declines greater than 70%.

Second option, pure market neutral: completely neutralize the exposure to the price, for example with a cash and carry (buy the asset in cash and at the same time sell an equivalent futures contract) to collect the funding. The volatility almost completely disappears, but the return also becomes modest. It also depends on funding rates, which vary greatly from one period to another.

The first is to maintain exposure to the market. We keep part of the capital in bitcoin to benefit from the underlying trend.

The second is to hedge part of this exposure with futures. Taking a short position on a futures contract allows you to protect yourself against a decline without selling the asset held. The coverage is only partial: the goal is to cushion the declines, not to cancel them.

The third is to capture oscillations with a systematic order grid. The principle is simple: we buy in stages when the price falls and we sell in stages when it rises. Each round trip between two levels generates a small gain.

A semi-neutral strategy is not a winner in all markets. Here, according to data published by Neutralis, is the expected behavior in each diet:

This overview says the essential: a semi-neutral approach exchanges part of the upside potential for partial downside protection. It is judged on a complete market cycle, not on a quarter of euphoria.

Equilux, developed by Neutralis, applies this principle in a fully automated manner. The strategy focuses primarily on bitcoin, the most liquid and deepest asset on the market, combined with the stablecoin USDC.

Machine-translated from French