What Is the Primary Difference between a “Short Hedge” and a “Long Hedge” Using Futures Contracts?
A short hedge involves selling a futures contract to protect against a decline in the price of an asset already owned or expected to be produced, such as a miner's future crypto production. A long hedge involves buying a futures contract to protect against an increase in the price of an asset that one plans to purchase in the future.
Miners primarily use a short hedge to lock in a selling price and secure revenue.
Glossar
Short Hedge
Mitigation ⎊ A short hedge, within cryptocurrency derivatives, represents the strategic establishment of a short position in a related asset to offset potential losses stemming from an existing, long exposure.
Long Hedge
Hedge ⎊ A long hedge, within the context of cryptocurrency derivatives, represents a strategy designed to mitigate downside risk associated with an anticipated price decline in an underlying digital asset.
Hedge
Mitigation ⎊ A hedge, within cryptocurrency and derivatives markets, represents a strategic position established to offset potential losses stemming from adverse price movements in an existing asset or portfolio.