Required Legal Notice: Virtual currencies, real risks. The only guarantee in crypto is risk. Read more

Required Legal Notice: Virtual currencies, real risks. The only guarantee in crypto is risk. Warning: The value of your virtual currencies can rise or fall sharply, and your initial investment may be lost completely; virtual currencies are not covered by the guarantee funds that cover bank deposits; there is no legal mechanism on the virtual currencies market to prevent market manipulation or insider dealing; virtual currencies depend entirely on a specific computer technology and infrastructure, which in certain cases may be very recent and not yet adequately tested; if one loses the identification code or password giving access to the virtual wallet in which the virtual currency is stored, the currency held therein will be irretrievably lost; virtual currencies are currently accepted as a means of payment to a limited extent, and in most countries there is no legal obligation to accept them; for more information about the risks associated with an investment in virtual currencies, we advise you to read the Wikifin page What is a cryptocurrency? | Wikifin.

Hedging strategies in Derivatives

Last updated: 9 жніўня 2025 г.

Derivatives contracts allow to almost perfectly hedge the price risk of digital assets. Assume you own 1 Bitcoin (BTC) which currently trades at 35,000 USD and you want to lock in this price. By selling short 35,000 derivatives contracts (each with a contract size of 1 USD on single-collateral derivatives), you have locked in the current price, no matter if BTC moves up or down.

Note: these examples are for demonstrative purposes only and do not include trading fees nor funding rate payouts.

EXAMPLE: PRICE INCREASES	Assume you buy back the derivatives at 40,000 USD. You incur a loss of ( 1 / 35,000 - 1 / 40,000 ) * (-35,000) = -0.125 BTC. Including your original 1 BTC, you now own only 0.875 BTC. At the new spot price of 40,000 USD, this is still worth 0.875 * 40,000 = 35,000 USD.
EXAMPLE: PRICE DECREASES	Assume you buy back the derivatives at 32,000 USD. Your profit is ( 1 / 35,000 - 1 / 32,000 ) * (-35,000) = 0.09375000 BTC. Including your original 1 BTC, you now own 1.09375 BTC. At the new spot price of 32,000 USD, this is still worth 1.09375 * 32,000 = 35,000 USD.

The decimal and thousands separators shown in this article may differ from the formats displayed on our trading platforms. Review our article on how we use points and commas for more information.

Hedging strategies in Derivatives

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