How Can a Miner Use Financial Derivatives like Futures to Hedge against Cryptocurrency Price Volatility?

A crypto miner can use a short futures contract to hedge against the risk of a price drop for the coins they expect to mine. By selling a futures contract today, they lock in a price at which they will sell their future production.

If the price falls, the loss on their mined crypto is offset by the profit from their short futures position. This converts volatile crypto revenue into a predictable fiat amount, securing funds to cover operational costs like electricity.