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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteA Bitcoin hedge can still be liquidated even when the fund owns enough spot Bitcoin to offset its futures exposure. The problem is that a futures venue may assess margin using only collateral it recognizes in the relevant account or wallet—not assets held elsewhere. If that account falls below its margin requirement, the venue may liquidate the futures position before the hedge has time to converge.
How a hedge can fail without the market view being wrong
Consider a cash-and-carry trade: a fund owns spot Bitcoin and shorts Bitcoin futures, aiming to earn the difference between the futures price and spot price as that difference narrows. Economically, the two positions can offset much of their price exposure over the trade horizon. Operationally, however, each venue or account may evaluate its own collateral and margin independently.
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If the short futures position loses value or its margin requirement rises, the futures venue may demand more eligible collateral. Spot Bitcoin held in a separate account may not count toward that requirement, even if it is part of the same fund’s overall hedge. The fund can therefore face a margin shortfall at the futures venue while holding assets elsewhere.
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The Bank for International Settlements (BIS), in its working paper Crypto carry, describes the resulting risk: “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 mechanism, not a claim that every fund or exchange will experience it.
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Why selling the spot leg for cash can deepen the problem
A fund may try to meet the futures margin call by selling some spot Bitcoin and moving the proceeds to the futures account. That can provide cash, but it also reduces the amount of spot Bitcoin backing the short futures exposure. The hedge is then smaller or less balanced than it was before the sale.
If the futures leg is liquidated before the price difference converges, the fund may lose the opportunity to complete the original trade as planned. The key distinction is between economic offset—whether positions offset one another when viewed together—and margin recognition—which assets a particular venue counts when deciding whether a specific account meets its requirements.
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What cross margin and portfolio margin can—and cannot—do
Margin features may combine eligible balances and positions within a defined scope. They do not, by themselves, establish that collateral can be shared across separate exchanges. Even within one provider, the rules can differ by product, wallet, account type, asset, and region.
| Documented feature | What the cited documentation says | Limit to keep in mind |
|---|---|---|
| Coinbase International Exchange collateral for perpetual futures | Eligible alternative crypto assets can support perpetual futures positions. Coinbase’s documentation says a specified group of assets ceases to count as eligible collateral effective September 29, 2026. | Eligibility is asset- and date-specific. Check the live list and current terms for the relevant account and region. |
| Binance Portfolio Margin Pro | The documentation describes joint equity and maintenance-margin calculations using supported balances and positions across Cross Margin, USDⓈ-M Futures, and COIN-M Futures. | This is not evidence that every Binance account or jurisdiction is included. The page was updated January 2, 2026, refers to rules effective January 5, 2026, and warns that its FAQ may be outdated. |
| 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. | Do not assume that isolated Coin-M wallets share collateral with one another or with Multi-M. |
| Kraken Multi-M wallet | Kraken’s documentation describes account-wide collateral exposure: all assets in that wallet are at risk in an account-wide liquidation. | Kraken also says unrealised profits on isolated positions cannot margin cross positions. |
These examples show why a feature name is not enough to assess a hedge. “Cross” or “portfolio” margin can describe consolidation inside a particular product scope; neither term proves that assets held at another venue will count toward a margin call.
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What to check before relying on a hedge across accounts
Map the rules for each leg of the trade, including the account that holds the collateral and the venue that can liquidate the position. Use the current governing terms for the specific product and jurisdiction, since eligibility and rules can change.
- Eligible collateral: Which assets count, how are they valued, and what haircuts or valuation adjustments apply?
- Consolidation scope: Which accounts, wallets, products, and instruments are included in the same margin calculation? Are assets at another venue excluded?
- Margin trigger and liquidation process: What maintenance-margin threshold applies, and what happens when the account falls below it?
- Position offsets: Can isolated and cross positions offset one another, or are they assessed separately?
- Eligibility by region and date: Does the feature apply to the fund’s jurisdiction and account, and are the current rules in force?
- Effect of raising cash: If collateral must be moved or a spot position sold, how much of the original hedge remains?
What the evidence does not establish
The BIS paper supports the structural explanation that separate-account spot and futures positions can be forcibly liquidated before convergence during large carry spikes. The cited materials do not establish how often this happens to hedge funds, the losses attributable to it, or that all funds or venues handle margin the same way. The documented venue features illustrate different collateral scopes; they are not a universal rule or a recommendation to use a particular provider.
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