What Is a “Cross-Hedge” in the Context of Crypto Derivatives?

A cross-hedge involves using a futures or options contract on one cryptocurrency to hedge the price risk of a different, but highly correlated, cryptocurrency. For instance, a miner of a small-cap altcoin might use Bitcoin futures to hedge their price exposure because the altcoin's price movements closely track Bitcoin's.

This strategy is used when a direct derivatives market for the underlying altcoin does not exist or lacks sufficient liquidity.