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A Bitcoin hedge can be economically balanced and still be liquidated if its spot and futures positions rely on collateral in separate accounts. The futures venue may demand cash against a losing futures position without counting the Bitcoin held elsewhere—even when that spot position is intended to offset the trade over time.
Why a Bitcoin hedge can be liquidated while the spot is still owned
Consider a cash-and-carry trade: a fund holds Bitcoin in one account and shorts Bitcoin futures in another. Over the intended trade horizon, gains and losses on the two legs may offset one another as futures prices converge toward spot. But that economic relationship does not automatically carry over to margin calculations.
A futures venue generally assesses a position against the collateral it recognizes within the applicable margin scope. If the short futures position loses value or its maintenance-margin requirement rises, the venue can require additional eligible collateral. Bitcoin held in a separate spot account may not count toward that requirement. If the fund cannot meet the call with collateral the venue accepts, liquidation can occur before the trade converges.
The Bank for International Settlements (BIS) working paper Crypto carry describes this risk for spot and futures held in separate accounts. It states: “Given the large spikes in carry observed in Figure 2, there is substantial risk that a cash-and-carry position, with spot and futures held in separate accounts, will be subject to a forced liquidation before convergence.” This describes a structural risk, not an outcome that applies to every fund, exchange, or trade.
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How raising margin cash can weaken the hedge
The liquidation sequence
- The futures leg needs collateral. A loss or an increase in required margin creates a cash need inside the futures account.
- The spot leg is outside that margin scope. The futures venue may not recognize the Bitcoin held in the separate account as eligible collateral.
- The fund sells spot to raise cash. Moving proceeds to the futures account may help meet the call, if there is time and the funds can be transferred.
- The position becomes less balanced. Selling some of the Bitcoin reduces the spot quantity supporting the original hedge while leaving the futures exposure in place.
The result can be a forced reduction or closure of the futures position before convergence, or a smaller spot position that no longer offsets the futures exposure as intended. A spot holding therefore does not, by itself, guarantee that a separate futures position can survive a margin call.
What cross margin and portfolio margin do—and do not—mean
“Cross margin” or “portfolio margin” describes how a provider calculates risk across specified positions and collateral. It does not establish that every asset, wallet, product, account, or region is included. Nor does a feature offered by one exchange establish that collateral held at another exchange will count toward its margin requirements.
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Provider documentation illustrates how much the scope can vary:
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| Documented arrangement | What the documentation says | Important boundary |
|---|---|---|
| Coinbase International Exchange alternative crypto collateral | Eligible alternative crypto assets can support perpetual futures positions. Coinbase specifies an eligibility change effective September 29, 2026. | Eligibility is asset- and date-specific. Check the current eligible-asset list and terms; the feature does not establish that arbitrary spot holdings or balances at another venue count. |
| Binance Portfolio Margin Pro | The documentation describes joint equity and maintenance-margin calculations across supported balances and positions in Cross Margin, USDⓈ-M Futures, and COIN-M Futures. | The page was updated January 2, 2026, refers to rules effective January 5, 2026, and warns that its FAQ may be outdated. It should not be generalized to every account or jurisdiction. |
| Kraken Coin-M wallets | Kraken says each listed Coin-M asset has a separate wallet; liquidation of one Coin-M wallet does not affect the other listed Coin-M wallets or the Multi-M wallet. | That isolation is specific to the documented wallets and products; it is not evidence that collateral is shared across them. |
| Kraken Multi-M wallet | Kraken says all assets in the Multi-M wallet are at risk in an account-wide liquidation. Its documentation also says unrealised profits on isolated positions cannot margin cross positions. | Account-wide exposure within the wallet does not imply that isolated-position profits or assets held outside the documented scope will support every position. |
These examples are documentation-specific, not a ranking of venues or a guarantee about a particular fund’s account. Product rules and eligibility can change, and the governing terms for the trader’s region and account determine what collateral actually counts.
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What to check before treating two positions as a working hedge
Evaluate the margin arrangement, not just the economics of the trade. For each leg, confirm:
- Eligible collateral: Which assets count, how they are valued, and whether valuation haircuts or limits apply.
- Consolidated scope: Which accounts, wallets, products, and balances are included in the same equity and maintenance-margin calculation.
- Liquidation trigger and process: The maintenance-margin threshold, how a shortfall is handled, and whether the venue can reduce or close a position before a transfer completes.
- Position offsets: Whether the relevant isolated and cross positions can offset one another for margin purposes; do not infer this from the existence of a hedge.
- Eligibility by region and account: Whether the feature applies to the specific jurisdiction, account type, and products being used, and which current terms govern.
- Transfer timing: Whether funds can be moved and credited quickly enough to meet a call. A transfer path is not the same as collateral already recognized for margin.
If the spot and futures positions are at different venues, treat them as separate margin pools unless the applicable documentation explicitly establishes otherwise. The cited venue documents describe their own supported scopes; they do not establish universal cross-venue collateral sharing.
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What the evidence establishes about fund losses
The BIS paper supports the mechanism: separate-account spot and futures positions can face forced liquidation before convergence during large carry spikes. The cited materials do not establish how often this happens to hedge funds or the size of any current, fund-specific losses. It would be misleading to turn the mechanism into a claim that all Bitcoin hedge funds face the same outcome or to infer a current prevalence rate from older exchange-wide liquidation figures.
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