The directional trader with the correct fundamental view could still lose money. Consider a trader who is long HYPE and believes it will outperform SOL. In a bull market, HYPE could rise 50% while SOL gains 30%,and the directional trader wins. But in a bear market, HYPE might fall 40% while SOL drops 55%. The thesis was right but the position is underwater. The same pattern holds in capitulation events. The directional trader loses despite being correct about relative performance. The pair trader fares better in these scenarios because the exposure is to the spread rather than the absolute price. In a capitulation where both assets drop 60-70%, the directional trader faces a significant drawdown. The pair trader is down less and may even profit if the spread held.(Delphi Digital)