Why Is a ‘Perfect Hedge’ Often Impractical or Impossible in Crypto Markets?

A 'perfect hedge' aims to completely eliminate all risk of loss, but it is often impractical or impossible in crypto markets due to several factors. These include the high volatility and illiquidity of many altcoins, the presence of basis risk between spot and derivatives prices, and the high transaction costs and margin requirements.

Additionally, regulatory uncertainty and smart contract risk introduce non-market risks that are difficult to hedge with standard derivatives. The cost of a perfect hedge is often prohibitive, making the strategy economically unviable.