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Long-short strategy is where one attempts to minimise market risk by taking both long and short position in their portfolio. When investors implement this strategy, they are basically betting on the spread of the long and short equities. Therefore, they are able to profit regardless whether market is bullish or bearish.
How Fund Managers Are Doing It
Ark Invest Short GM & Ford, Long EVs - Cathy Woods
Shorting General Motors and Ford as their free cash flow has been negative in the past years. Going long on Tesla as they could potentially consume the automobile industry market share in years to come. Many investors foresee that traditional automobile companies are not able to catchup with the production of EVs Tesla is making.
Short Visa & Mastercard, Long Crypto - Chamath Palihapitiya
Shorting the traditional payment giants both Visa and Mastercard and going long on crypto like bitcoins and altcoins. He believes that blockchain payment methods would soon reshape the existing payment infrastructure.
With traditional payment giants charging high fees for consumer spending, there are many good reasons on how decentralised currency would be the future. Amazon has just stop accepting Visa and even incentivise consumers to stay away from Visa due to its high fees.
My Take On The Strategy
Long-short strategy may take a long time to work because the spread of such equities would mean that there would be new blue chip companies over taking existing ones. Like how if you were to short Nokia and go long on Apple, you wouldn’t just made a profit for apple growth but also profited from Nokia’s downfall. This would usually happen over a decade or two. However, in the recent decade, this could happen within 3-5 years especially in the disruptive technology industry. To fully maximise this strategy, one needs to be capable of picking company that could disrupt existing ones with fundamental analysis.
My Set Of Long-Shorts
Shorting Ethereum and Long on other Alts
We all agree that Ethereum is still the king of alts. However in the recent years, there has been a shift of liquidity into other alts such as Luna, Bsc, Avax, Sol, Ftm. Because of how fast crypto space is growing due to its interoperability, new projects could potentially catch up to the existing bluechip crypto coins like Ethereum.
Even when they are coming up with Ethereum 2.0, they have announce that the gas fees for consumers would still be high. That would potentially hinder it’s growth against other cheaper and affordable alts. New and upcoming defi projects would turn to Fantom instead of Ethereum.
Shorting Banks and Long On Crypto
This is similar to Chamath’s strategy by shorting Visa and Mastercard. However, a few has foresee that hedging against banks for crypto could be very likely possible in the near future. At the end of the day, the purpose of crypto currency is to allow decentralise finance to take place. For it to happen, crypto has to occupy a large pie of the market. Therefore, the growth of crypto would surpass banks which is already happening actually.
So what are your long-short strategy and how do you see this work? Leave your comments below!
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Disclaimer:
All of these are merely my knowledge and not financial advice. Please do your own due diligence and have conviction before investing. The information above is based on many hours of research out of my own curiosity/interest in YouTube, Google, blogs and discord communities. Leveraging & filtering information from other crypto enthusiasts and analysts.
