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0xSun: I have gone long on ETH and short on a basket of altcoins for hedging, believing that institutional funds flowing into ETH will not spill over to other altcoins
BlockBeats News, August 1st, Smart Money, crypto KOL 0xsun.sol (@0xSunNFT) stated on social media that the current market sentiment is highly divided between bulls and bears. The individual has currently opened a hedge trade (long ETH & short a basket of altcoins) with a position size of approximately 1:1.
The rationale for being long on ETH is that ETH was a major driver of the recent uptrend at the end of June, with institutions following MicroStrategy's lead by purchasing ETH through corporate financing. Additionally, within the stablecoin narrative, ETH serves as a crucial infrastructure and settlement layer. Drawing from MicroStrategy's previous purchase of BTC, which drove prices up continuously and resulted in most altcoins significantly underperforming Bitcoin, the funds that institutions and corporations use to buy ETH are unlikely to overflow into other altcoins.
Furthermore, according to CMC data, in the past 30 days, only 20 tokens out of the Top 200 have had a greater price increase than ETH, including tokens like BONK, ZORA, CFX, and ENA, which were notably driven by positive events.
For the altcoins, the logic follows the previous shorting strategy, focusing on selecting altcoins with relatively high market capitalization, not leading projects, showing weak price action, and having low visibility. The shorting is done through diversification, setting stop-loss orders, and guarding against any individual asset experiencing a sudden price surge.
0xsun added that if the second half of the year continues to be bullish, there is a strong belief that it will still be primarily driven by ETH. In the event of a bear market, it is not believed that altcoins can thrive independently, while ETH has at least the support of institutional buying power. The situation that would render this hedging strategy ineffective would either be if the altcoin season truly arrived, with most altcoins continuously outperforming ETH, or if ETH stagnates or leads a downturn while other altcoins experience a relatively minor decline. Based on the experience of the past few months, it is perceived as less likely.
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