To make this work though, you have to be able to eat short term losses and think on longer horizons.
A wise man once said that the market can stay irrational longer than you can stay solvent. In actual practice, it turns out that, even if you’re 100% correct that a bubble exists, it’s still really hard to make money by betting against it, because the only ways to do that involve holding onto an investment that is constantly hemmoraging money until the moment when the bubble finally does “burst”. If the market persists in undervaluing an asset you can just HODL and come out ahead in the long run, but if you try to HODL a short position, you just keep on losing more and more money every day the bubble fails to burst.
A wise man once said that the market can stay irrational longer than you can stay solvent. In actual practice, it turns out that, even if you’re 100% correct that a bubble exists, it’s still really hard to make money by betting against it, because the only ways to do that involve holding onto an investment that is constantly hemmoraging money until the moment when the bubble finally does “burst”. If the market persists in undervaluing an asset you can just HODL and come out ahead in the long run, but if you try to HODL a short position, you just keep on losing more and more money every day the bubble fails to burst.