Delta-Neutral Strategies vs. Hedging: They are not the same!

Two terms that often pop up when looking up yield farming in crypto are delta-neutral strategies and hedging. They might sound similar, but they serve completely different purposes. In this blog, we’ll break down both concepts into simple terms, explore their pros and cons, and help you understand which you should resort to in a given situation.

What is Hedging?

Hedging is a strategy used to protect your portfolio from potential losses. It is like buying insurance for your car - if there is any accident, your insurance will cover the losses. Likewise, if you are holding Bitcoin and you’re worried the price might drop, you can short position on futures. If Bitcoin's price does go down, your short position will earn a profit, helping offset your losses.

Key Features of Hedging:

• Focuses on risk protection.

• Can reduce losses but may also limit gains.

• Usually used for short-term market uncertainty.

What is a Delta-Neutral Strategy?

A delta-neutral strategy is a more advanced approach often used in crypto arbitrage and yield farming. The goal is to balance your positions so that you’re not affected by market movements (hence “neutral” to delta, or price changes).

For example, in spot-perpetual arbitrage, you buy an asset (like ETH) on the spot market and sell the same amount on the perpetual futures market. Since gains and losses from price changes cancel each other out, your profit comes from the funding rate difference, not from market direction.

Key Features of Delta-Neutral Strategies:

• Aims to generate steady income.

• Returns depend on funding rates or market inefficiencies.

• More complex and often automated.

Delta-Neutral vs. Hedging: The Core Difference

While both strategies aim to protect against market volatility, hedging is defensive—you’re reducing possible losses. Delta-neutral strategies are offensive—you’re trying to profit from market inefficiencies while neutralising risk.

Now that you’ve understood the difference between hedging and delta-neutral strategies, use them effectively to protect your funds and earn steady income in the future. Furthermore, if delta-neutral strategies interest you, check out Multipli.

What is Multipli?

Multipli is a platform designed to help you earn stablecoin yield using delta-neutral strategies like spot-perpetual and contango arbitrage. These methods aim to deliver consistent returns without worrying about market directions. All you need to do is try Multipli and let it do the grinding for you!

Check out one of the fastest growing DeFi yield platforms now.