What is Bitcoin Hedging (Is Bitcoin Hedging Arbitrage Illegal)?

What is Bitcoin Hedging? The price difference between Bitcoin and traditional financial markets has always been an important indicator of portfolio diversification. In 2017, when investors started paying attention to risky assets, the price of Bitcoin surged from around $11,000 to over $20,000, reaching a historical high. However, this volatility has decreased in the following years. According to recent studies by CoinMetrics, the market value of cryptocurrencies has dropped by over 60% since the first quarter of 2020.

For those unfamiliar with Bitcoin hedging strategies, it is an interesting and complex concept. What is Bitcoin hedging? This article will explain the main functions and use cases of Bitcoin hedging. (Bitcoin is a hedge fund)

Is Bitcoin Hedging Arbitrage Illegal?

According to the Securities Daily, China has made it clear that Bitcoin arbitrage does not fall under the category of hedging tools under current financial regulatory rules.

The Securities Daily learned from the Supreme People’s Court that there are currently two types of virtual currencies in China that pose money laundering risks:

The first is “leveraged trading,” which involves using futures contracts, options, and other financial derivatives to sell stocks or funds at low prices in the market through various means of hedging.

The second is achieving arbitrage through “targeted issuance” or “quantitative repurchases.”

The third is investing through other means, such as “quantitative manipulation” or “off-exchange price oracles.” If digital assets are treated as a specific investment object, these operating behaviors are suspected of illegal activities and should be severely cracked down upon.

In response to this phenomenon, officials from the central bank pointed out, “We are actively communicating and coordinating with relevant departments and banks.” At the same time, they emphasized that “although blockchain technology has been used in many application areas, it is decentralized protocols (such as public chains) that can truly solve these problems. It can effectively guarantee network security and allow more people to participate.”