✍️🛡️ Ever felt nervous watching your spot portfolio dip? I certainly have, losing thousands before learning how to properly protect my gains. Hedging with futures isn't about profit; it's about minimizing risk.
Imagine you hold 1 BTC spot, currently at $50,000. If you foresee a temporary correction and want to protect, say, 10% of its value without selling, you'd open a short futures position. To hedge 10% of your 1 BTC, you'd short 0.1 BTC ($5,000 nominal value) using low leverage like 2x-5x. If BTC drops by 5%, your spot value is down $2,500, but your short position gains roughly $250. It’s not a full offset, but it's protection.
The cost? Funding rates. If you're short, you usually pay a small fee every 8 hours, perhaps 0.01%. On a $5,000 position, that's $0.50 per 8 hours. Worth it...
Imagine you hold 1 BTC spot, currently at $50,000. If you foresee a temporary correction and want to protect, say, 10% of its value without selling, you'd open a short futures position. To hedge 10% of your 1 BTC, you'd short 0.1 BTC ($5,000 nominal value) using low leverage like 2x-5x. If BTC drops by 5%, your spot value is down $2,500, but your short position gains roughly $250. It’s not a full offset, but it's protection.
The cost? Funding rates. If you're short, you usually pay a small fee every 8 hours, perhaps 0.01%. On a $5,000 position, that's $0.50 per 8 hours. Worth it...