You have:
$10,000 in spot ETH
ETH = $2,500
You open a short on futures for part of the position.
🔻 ETH falls by 10%
→ spot: −$1,000
→ short: +$800–$1,000
👉 the deposit was almost unaffected
🔺 ETH rises
→ you earn, but the risk was under control
Let's imagine a simple situation.
You bought ETH in spot for $10,000.
Price — $2,500.
To protect your position, you open a short on futures also for $10,000.
THE PRICE IS STAGNANT. THE MARKET IS NOT MOVING
ETH remains around $2,500.
Spot = 0
Short = 0
But there is something that is often forgotten—funding.
FUNDING ISSUE
If the majority is long, shorts pay funding.
Assuming:
funding = 2% per hour
position = $10,000
👉 You pay $200 every hour just for holding the hedge.
In 5 hours: • −$1,000
In 24 hours: • −$4,800
The price has not changed.
And the deposit—yes.
WHAT DOES THIS MEAN IN PRACTICE
Hedging:
❌ not for long holding
❌ not a 'set it and forget it'
❌ dangerous with high funding
A full hedge makes sense in the short term: • before news
• during uncertainty
• when it's important to preserve capital, not to earn
HOW EXPERIENCED PEOPLE SOLVE THIS
• partial hedge (30–60%)
• hedge only during news periods
• using options instead of futures
• closing the hedge when funding changes
CONCLUSION
Hedging is a tool, not a universal protection.
Sometimes unhedged volatility is cheaper than stable funding.
So the question is not 'to hedge or not',
and when, what, and for how long.
❓ Do you look at funding before opening a hedge?
