Between Buy and Hold and Market Neutral: Understanding Semi-Neutral Strategies

Keeping exposure to Bitcoin while cushioning its drops: this is the promise of so-called semi-neutral strategies. Here’s how they work, in which markets they meet their objectives, and in which they fall short.

The Crypto Investor's Dilemma

Anyone investing in crypto assets eventually faces the same choice.

The first option is buy and hold: buy and keep. Over the long term, this strategy has often paid off, but at the cost of brutal declines. Since its inception, Bitcoin has experienced several drops exceeding 70%.

The second option is pure market neutral: completely neutralizing price exposure, for example with a cash and carry (buying the asset spot and simultaneously selling an equivalent futures contract) to capture the funding. Volatility almost entirely disappears, but the return also becomes modest. It also depends on funding rates, which vary significantly from period to period.

What is a Semi-Neutral Approach?

The idea consists of three elements that combine.

The first is to maintain market exposure. A portion of the capital is kept 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 one to protect against a decline without selling the held asset. The hedge is only partial: the goal is to cushion declines, not to eliminate them.

The third is to capture fluctuations with a systematic order grid. The principle is simple: buy in increments when the price drops and sell in increments when it rises. Each back-and-forth between two levels generates a small gain.

How These Strategies Perform According to the Market

A semi-neutral strategy is not profitable in all markets. Here’s the expected behavior in each regime, according to data published by Neutralis:

• Strong Bull Market: positive result, but part of the rise is absorbed by the hedge. In prolonged euphoric periods, the strategy may perform worse than a simple buy and hold.
• Moderate Bull Market: directional exposure pays off and fluctuations add to it. The result is generally positive, with lower volatility than buy and hold.
• Sideways Market: the directional component is neutral, performance comes from fluctuations. This is often the most favorable terrain, and the result tends to be positive.
• Moderate Bear Market: limited losses, partly offset by the hedge and the grid.
• Strong Bear Market: loss, mitigated by the hedge. During a prolonged decline, the gains from the grid usually do not suffice to compensate.

This overview says it all: a semi-neutral approach trades part of the upside potential for partial downside protection. It should be judged over a complete market cycle, not over a quarter of euphoria.

A Concrete Example: Equilux

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

Capital is allocated between a stablecoin pocket and a Bitcoin pocket, and exposure is continuously adjusted between the two. Orders are placed systematically to capture movements both up and down, while a partial hedge in futures reduces overall volatility.

A moderate borrowing increases investment capacity, with a high safety margin to avoid liquidation. Funding revenues remain marginal in the overall performance.

The strategy is executed directly on the investor's Hyperliquid account. The model is non-custodial: Neutralis can place orders but can never withdraw or transfer funds, and access can be revoked at any time. It is neither copy trading nor managed accounts: the investor continuously sees their positions and transactions.

In terms of numbers, Neutralis aims for about +17% per year (or +1.4% per month on average), with a historical maximum drawdown of -11%, reduced volatility of about 65% compared to Bitcoin, and significant declines reduced by about 80%. These figures describe the historical behavior of the strategy across several market regimes. They do not constitute a guarantee, and past performance does not predict future performance.

Fees are limited to 20% performance fees calculated on a high water mark: you only pay when the value of your account exceeds its previous peak. There are no subscriptions, no commitment duration, and no blocking of funds, which remain in your account, and stopping is possible at any time without fees.

Risks to Keep in Mind

Reducing volatility does not eliminate risk.

The platforms used are exposed to technical and regulatory risks. Bitcoin can drop sharply, even losing all value in extreme cases. During extreme market events, price discrepancies may arise between spot and futures (the basis risk), temporarily weakening the hedge. Derivative products carry their own risks, even with moderate and controlled leverage.

Finally, crypto assets remain highly volatile, and losses can reach the entirety of the invested capital.

Conclusion

Semi-neutral strategies address a specific question: how to remain exposed to the crypto market without suffering its 70% drops head-on? Their value is measured over a complete cycle, accepting to perform worse than the market during euphoric phases.

This article is educational and does not constitute investment advice.