What is delta-neutral (in crypto)?

What “delta” means

Delta is how much a position’s value changes when the underlying price changes. Hold one coin and its price rises $1, you make $1 — positive delta. Short one coin and it rises $1, you lose $1 — negative delta. A delta-neutral position is one where the two cancel to roughly zero, so it barely moves whether the price goes up or down.

Why long-spot / short-perp cancels price risk

Hold the asset in spot (positive delta) and short an equal amount of its perpetual future (negative delta). If the price rises, spot gains what the short loses; if it falls, the reverse. Net delta ≈ 0.

With direction removed, what is left is the funding rate — usually paid to shorts. That trade is funding-rate capture.

What risk remains — delta-neutral is not risk-free

What is left:

• Funding can turn negative. When the market flips net-short, the hedged short pays instead of earns.
• Execution and slippage. Every rebalance costs money on both legs — Fygga’s own backtest shows a daily cadence turning the edge negative.
• Basis, margin and liquidation. Spot and perp prices drift apart, so the hedge is never perfectly delta-zero, and a sharp move can liquidate the short leg while the pair is still hedged. In Fygga’s backtest (1 Jan 2022 – 3 Sep 2026), none of 16 cost and rebalancing combinations survived a 5× margin test.
• Exchange and counterparty risk. The venue can fail, freeze withdrawals, change margin rules, or auto-deleverage a position. Hedging price does nothing about that.

Educational only — not financial advice.

How this connects to Fygga’s numbers