What Is “Basis Risk” in the Context of a Crypto Futures Hedge?

Basis risk is the risk that the price of the asset being hedged (the spot price of the mined crypto) and the price of the futures contract do not move perfectly in tandem. The "basis" is the difference between the spot price and the futures price.

If the basis unexpectedly widens or narrows before the hedge is closed, the futures position may not perfectly offset the loss on the spot asset. This imperfect correlation is the residual risk that remains after the hedge is implemented.