What Derivative Instruments Are Used to Hedge against Volatility in Energy Costs for Miners?

Cryptocurrency miners use several financial derivative instruments to hedge against volatile energy costs, which are a primary operational expense. The most common are futures and options contracts on electricity or natural gas, allowing them to lock in a price for future energy consumption.

They may also engage in Power Purchase Agreements (PPAs) with energy producers, which function like a long-term fixed-price contract. More advanced strategies could involve weather derivatives to hedge against fluctuations in renewable energy supply (e.g. hydro or wind) that could impact electricity prices.