Hedging
Hedge · Delta-neutral hedge · Spot-futures hedge
Taking a position that moves the opposite way to coins you hold or a trade in progress, to cut its price risk.
Simple explanation
Background: Korea's won exchanges (Upbit, Bithumb, Coinone and Digital X, formerly Korbit) offer spot trading only, so hedging a Korean position usually means a short on an overseas futures market. Its best-known Korean use is in kimchi premium arbitrage.
Hedging is not about making more money; it narrows how far your result can swing. If you own one bitcoin and short the same amount, a price fall on the coin is covered by the short's gain, and a rise is eaten by the short's loss. A combination whose total barely changes whichever way the price goes is called delta neutral. You give up the upside and pay to keep the hedge in place. A partial hedge covers only part of the exposure.
The most common hedging tool in crypto is a short on an overseas exchange's perpetual futures, which never expire and track the spot price, so they can be held for as long as needed. Dated futures and options are also used. As of early November 2026, though, Korea's won exchanges offer no futures, options or other derivatives, so there is almost nothing to hedge with inside a Korean exchange. Borrowing coins through the coin-lending services some Korean exchanges run and selling them works much like a short, but each exchange sets its own limits, fees and terms.
The classic case is the kimchi premium arbitrage hedge. When Korean prices are at a premium, a trader (1) buys the coin spot on an overseas exchange, (2) shorts the same quantity on overseas perpetual futures, (3) sends the coin to a Korean exchange and (4) sells it for won while closing the short. If the price falls while the coin is in transit, the short's gain makes up for it, so in theory what is left is close to the premium at the moment of sale. With a reverse premium the trade runs the other way: buy in Korea, short overseas futures, send the coin abroad, then sell it and close the short.
A hedge only covers the coin's dollar price abroad. If, during the transfer, the Korean price falls further than the overseas price, so the premium itself shrinks, that loss stays with you; premiums often vanish while a deposit is delayed. The coins are sold for won but were bought with dollars (or Tether), so moves in the exchange rate or the Tether premium are not hedged either. If the gap between futures and spot (the basis) differs between opening and closing the short, that difference is a gain or loss too, and the short's profit and liquidation are calculated on the futures exchange's mark price, not the spot price.
The hedge adds costs and risks of its own. Futures fees are paid twice, on opening and closing, and funding is exchanged for as long as the short is open. Binance settles funding every 8 hours by default (more often for some contracts or in some conditions): when the rate is positive the short receives it, when negative the short pays. Rates are often positive in bull markets but can flip at any time, and every delay adds another settlement. The short also needs its own margin in the overseas futures wallet. If the price spikes, the short's loss lands in that wallet while the matching gain on the coin is in transit or on the Korean exchange, and the two cannot offset each other. Run out of margin and the short is liquidated first, the hedge is gone, and you carry the full price risk from then on.
In the end the hedge is only as good as the transfer is fast. Block confirmations, exchange processing, Travel Rule checks, wallet maintenance or a deposit and withdrawal suspension can stretch a transfer from hours to days, and funding, premium swings and liquidation risk all grow with it. Selling a large amount into a thin Korean order book adds slippage. Someone hedging coins held on a Korean exchange with an overseas short faces the same limit: the won value of those coins is overseas price × exchange rate × (1 + premium), and the short covers only the overseas price, leaving premium and currency moves exposed.
Hedging through overseas exchanges also brings legal questions. An overseas exchange that serves Korean users without registering with Korea's Financial Intelligence Unit (FIU) breaks the Act on Reporting and Using Specified Financial Transaction Information, and the authorities have blocked such exchanges' apps and websites. Assets held there sit outside Korea's user-protection rules, and depending on how won is sent abroad, Korea's Foreign Exchange Transactions Act may apply. This is general information, not legal or tax advice; check the authorities' official guidance or a professional before trading.
CoinGaja's Kimchi Premium Calculator takes trading fees, withdrawal fees and order-book slippage out of the premium and shows what you would actually keep, but it does not include price moves during the transfer, the cost of getting dollars or deposit delays, nor the fees and funding of a futures hedge. The risk of a blocked transfer can be checked on the deposit and withdrawal suspensions page, and the cost of dollars (Tether) on the Live Tether premium page. A hedge never guarantees a profit.
Example
Buy 0.1 BTC spot abroad at $70,000 ($7,000; if the dollars cost ₩1,400 each, ₩9,800,000) and short the same 0.1 BTC on perpetual futures → the Korean price is ₩102,900,000, a kimchi premium of +5.00%
In transit, both prices fall 4%: $67,200 abroad, ₩98,784,000 in Korea → the short gains (70,000 − 67,200) × 0.1 = $280 (₩392,000)
Selling in Korea: ₩9,878,400 + ₩392,000 − ₩9,800,000 = +₩470,400 (about $336) / without the hedge: ₩9,878,400 − ₩9,800,000 = +₩78,400 (about $56)
If the overseas price holds but the Korean price slips to ₩99,960,000 (premium +2.00%) → the short makes $0, and ₩9,996,000 − ₩9,800,000 = +₩196,000 (about $140): the hedge cannot cover a shrinking premium
At a funding rate of +0.01% the short receives 7,000 × 0.01% = $0.70 every 8 hours; at -0.05% it pays $3.50 (about ₩4,900) → three times if the transfer takes a day
Back the short with only $700 of margin (10x) and, at an assumed 0.5% maintenance rate, it is liquidated after a rise of about +9.5% ($76,650), breaking the hedge
Trading fees, withdrawal fees and slippage are left out
※ Example numbers, for illustration only
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