How Can a Trader Hedge the Risk of an Existing Spot Position Using Crypto Futures? ▴ Learn

How Can a Trader Hedge the Risk of an Existing Spot Position Using Crypto Futures?

A trader with a long spot position (holding Bitcoin) can hedge by simultaneously opening a short position in Bitcoin futures contracts. This is known as a short hedge.

If the price of Bitcoin falls, the loss on the spot holding is offset by the profit on the short futures position, effectively locking in a price for the spot asset.

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