How Can a Large, Unexpected Network Event (Like a Hard Fork) Impact the Crypto Basis?
A large, unexpected network event like a hard fork can drastically impact the crypto basis by creating two distinct assets from the original. This sudden, unpriced change introduces extreme uncertainty and volatility in the spot market.
Since the futures contract is tied to the pre-fork asset or an index that may not accurately reflect the post-fork market, the basis can become highly volatile and unpredictable, severely impairing the effectiveness of any hedge.
Glossar
Network Event
Occurrence ⎊ A network event in the context of crypto derivatives refers to any significant change or disruption in the underlying blockchain or trading infrastructure.
Hard Fork
Disruption ⎊ A hard fork represents a radical divergence in a blockchain’s protocol, creating a permanent split and typically resulting in a new cryptocurrency.