How to Hedge Your Spot Crypto Holdings Using Perpetuals on Flipster

Hedging is one of the most effective strategies to protect your crypto portfolio from adverse price movements without fully liquidating your holdings. By using perpetual futures contracts, traders can offset potential losses in spot positions while retaining ownership of their assets. This guide explains how to hedge your spot crypto holdings with perpetuals on Flipster, step-by-step, and provides actionable tips for managing risk effectively.

What Is Hedging in Crypto Trading?

Hedging involves opening a position to offset potential losses in another position or portfolio. In crypto, this often means using derivatives like perpetual contracts to lock in prices and reduce exposure to volatility.

For example:

• If you hold 1 BTC in spot, but fear short-term downside, you could open a short BTC perpetual position.

• If BTC’s price drops, losses in your spot holdings are partially or fully offset by gains in your short position.

Benefits of Using Perpetuals for Hedging

Perpetual futures are particularly well-suited for hedging because they:

No Expiry Dates for Flexible Protection

Perpetual futures don’t have an expiry date, so you can keep a hedge open for as long as needed without rolling into a new contract. This avoids rollover risk and lets you adjust the hedge ratio as your spot holdings change. The main trade-off is funding—paid or received between longs and shorts at set intervals—which can either add to your gains or increase your costs depending on market conditions.

Offer high liquidity

High liquidity on major pairs like BTC and ETH means tighter bid-ask spreads and better execution when opening, adjusting, or closing a hedge. It reduces price impact on market orders and increases the chances of limit orders filling quickly at your target price. 

For best results, adjust hedges during peak liquidity hours (often when US and EU markets overlap), use iceberg or partial orders to avoid revealing trade size, and check order book depth along with spread width before placing large trades.

Provide leverage options

Using perpetual futures, you can hedge your spot holdings with much less capital. For example, a $50,000 spot BTC position can be hedged with about $10,000 in margin using 5× leverage, freeing up cash for yield opportunities, diversification, or collateral reserves. 

To reduce risk, use isolated margin to limit losses to a single position, keep a margin buffer 2–3× above the requirement to prevent forced liquidation in volatile markets, and stress-test for sharp price moves (e.g., ±5% in minutes). Leverage improves capital efficiency but increases liquidation risk, so size your hedge conservatively.

Support both long and short positions

Perpetual futures let you hedge in either direction. To protect a long spot position, you can short the corresponding perpetual, so gains on the short offset losses in the spot, keeping your portfolio value stable. If you’ve sold spot for strategic or tax reasons—or borrowed crypto to short—you can long the perpetual to guard against upside moves. 

You can also use them for indirect hedges, such as covering a basket of altcoins with a correlated large-cap perp like ETH, adjusting the hedge ratio over time based on recent price correlations. Always set clear exit criteria—by price, time, or events—to avoid unnecessary costs from keeping the hedge open too long.

Step-by-Step: How to Hedge Your Spot Holdings on Flipster

1. Identify Your Exposure

Determine the size and value of your spot holdings. Example: If you hold 2 ETH at $3,500 each, your total exposure is $7,000.

2. Choose the Right Perpetual Contract

On Flipster, search for the matching perpetual pair. Ensure you select the correct contract to match your spot asset.

3. Calculate Your Hedge Size

• Full Hedge: Match the contract size to your spot holdings (e.g., short 2 ETH worth of contracts).

• Partial Hedge: Hedge only a portion if you still want upside exposure.

4. Open a Hedge Position

• Go to Trade → Select your asset → Choose Short for downside protection.

• Select a Market Order for instant execution, or a Trigger Order to enter at a specific price or time.

• Set leverage (optional). For a 1x hedge, match the notional value without leverage; higher leverage reduces margin requirement but increases funding rate costs.

5. Set Stop-Loss or Take-Profit Levels

Even hedges can go wrong if the market moves against you unexpectedly. Protect your margin with stop-loss orders.

6. Adjust or Close Your Hedge

When your outlook changes, unwind the hedge by closing your perpetual position.

Practical Hedging Scenarios

Bearish Short-Term Outlook

If you expect the market to dip in the near term but don’t want to sell your holdings, you can short BTC perpetuals while keeping your BTC spot. This way, any losses in spot are offset by gains in your short position.

Portfolio Rebalancing

When one asset, such as an altcoin, has surged ahead of others in your portfolio, you can hedge it with a short perpetual position while reallocating capital into other assets. This helps lock in gains while you diversify.

Event Risk Management

Major economic reports, central bank announcements, or token unlock events can create sudden volatility. Hedging with perpetuals before these events can protect against sharp, unexpected price swings.

Risk Management Tips

Avoid Overhedging

Only hedge the amount of your actual spot exposure. Overhedging can leave you overexposed in the opposite direction.

Track Funding Rates 

Funding rates can significantly affect your hedge’s cost or profitability. High negative rates, for example, can erode the benefit of your hedge if held too long.

Maintain Margin Buffers

Keep more margin than the minimum required, ideally 2–3×, to prevent forced liquidation if the market moves sharply against your hedge.

Review Regularly

Market conditions shift quickly. Revisit your hedge strategy often to ensure it still aligns with your portfolio and market outlook.

Why Hedge on Flipster?

Zero Spreads on Major Perpetual Pairs

When you open or adjust a hedge, every cent counts. Zero spreads mean you get the market price without paying extra hidden costs in the bid-ask gap, preserving more of your P&L, especially on large or frequent trades.

Ultra-Low Fees for High-Frequency Adjustments

Hedging often requires multiple tweaks as the market moves. Flipster’s ultra-low trading fees make it cost-effective to adjust positions regularly without eroding profits through excessive transaction costs.

Hedging with perpetuals is an effective way to protect your spot crypto holdings without selling them outright. By understanding your exposure, sizing your hedge appropriately, and leveraging Flipster’s low-cost, instant-execution environment, you can manage downside risks while preserving your upside potential.

Start hedging with Flipster’s zero spreads on major perpetual pairs today to stay ahead of market volatility.

Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility, and is not suitable for all investors. Please refer to our Terms.