Is cash-and-carry crypto arbitrage risk-free?

No. A hedge can reduce a specific price exposure, but margin, liquidation, execution, basis, funding, custody, counterparty, legal and tax risks remain.

Does a positive funding rate guarantee income for a short perpetual position?

No. Funding can change or reverse, and the position still faces margin, venue, settlement and execution risks.

Can a hedge be liquidated even if its other leg is gaining value?

Yes. A derivative venue assesses margin on the derivative account under its own rules. An offsetting spot gain elsewhere may not be available to meet a margin call.

Crypto Basis Trading: Hedge Mechanics and Risks Before You Trade

Learn

Strategy

5 min

Crypto Basis Trading: Hedge Mechanics and Risks Before You Trade

Understand the mechanics of spot-futures hedges, basis, funding, margin, settlement, execution and counterparty risk without treating cash-and-carry as guaranteed yield.

CryptoLVEditorial team

Updated August 13, 2026·5 min read

Track: Strategy & Risk·Lesson 25/32View track

#basis trading #futures #cash and carry #funding rate #margin risk

What the Basis Represents
How a Spot-Futures Hedge Works
Margin and Liquidation Are Central Risks
Funding Is Variable, Not Contracted Yield
Execution and Basis Risk
Custody, Counterparty, and Legal Risk
Pre-Trade Evidence Checklist
Red Flags
Bottom Line

Review and sources

Reviewed 2026-08-13 by CryptoLV Editorial. Next review: 2026-11-13.

CFTC: Understand the risks of virtual-currency trading opens in a new tab
Supports: Virtual-currency futures leverage can amplify losses and require margin replenishment or closing positions.
SEC Investor.gov: crypto asset securities alert opens in a new tab
Supports: Crypto-asset platforms can carry volatility, insolvency, withdrawal, and investor-protection risks.
FINRA: Understanding order types opens in a new tab
Supports: Order type choices involve tradeoffs between price control and execution certainty.

Add progress to your track

CryptoLVEditorial team

CryptoLV editorial content is reviewed against the linked primary sources. Check the source section for each guide's scope, reviewer, and next review date.

Twitter YouTube