What Is the Primary Risk Associated with Using Futures Contracts to Hedge a Cryptocurrency Mining Operation’s Revenue?

The primary risk is 'basis risk,' which is the possibility that the price of the cryptocurrency (e.g. Bitcoin) the miner holds and the price of the futures contract used for hedging do not move perfectly in tandem.

If the basis widens unexpectedly, the hedge may become imperfect, resulting in losses even if the spot price moves as anticipated. Additionally, miners face counterparty risk and margin call risk on the futures exchange.