🛡️📉 Thinking about protecting your valuable spot holdings? Futures aren't just for leverage junkies; they're powerful tools for risk management. Say you hold 1 BTC spot, currently worth $70,000. You believe a correction is coming but don't want to sell your long-term position. To fully hedge, you'd open a short position for 1 BTC futures. If BTC drops 10% to $63,000, your spot loses $7,000, but your short futures position gains $7,000. Net P&L for your overall portfolio is zero.
The cost? Funding rates. If the market is generally bullish (positive funding), you, as the short, will pay. Imagine funding is 0.01% every 8 hours. On your $70,000 short, that's $7 per 8 hours, or $21 daily. Over a month, that's $630 just to maintain the hedge.
Hedging makes sense if you have a strong...
The cost? Funding rates. If the market is generally bullish (positive funding), you, as the short, will pay. Imagine funding is 0.01% every 8 hours. On your $70,000 short, that's $7 per 8 hours, or $21 daily. Over a month, that's $630 just to maintain the hedge.
Hedging makes sense if you have a strong...