What Are the Most Common Hedging Strategies Used by Institutional Crypto Investors?

Institutional crypto investors use several common hedging strategies. Selling futures contracts is a primary method to protect against a decline in the price of their spot holdings.

Another strategy is to buy put options, which give them the right, but not the obligation, to sell their crypto assets at a predetermined price, setting a floor on their potential losses. For more complex strategies, institutions might use options spreads, such as collars (buying a put and selling a call), to define a price range for their holdings.

Some may also use short-selling in the spot market, though this is less common for pure hedging purposes.