How to Stop Guessing Bitcoin Prices and Start Earning: A Guide to Delta-Neutrality - ForkLog: cryptocurrencies, AI, singularity, future

# How to Stop Guessing Bitcoin Price and Start Earning: A Guide to Delta-Neutral Strategies

DisclaimerThe material published is for informational purposes only and does not constitute investment advice. ForkLog is not responsible for readers’ investment decisions.

Most traders lose funds over the medium and long term. The reason often lies in psychology: experience, intelligence, or deep technical analysis knowledge do not protect against mistakes.

Predicting price movements is extremely difficult. The situation is worsened by the dominance of algorithms and market makers. Large players often manipulate the market and “collect stops,” misleading even experienced professionals.

In this material, we will explain what delta-neutral strategies are and how they help earn regardless of trend and price dynamics.

What does “delta-neutral” mean?

First, let’s understand the term itself. The first component is “delta”. It is a coefficient that shows how much the price of a derivative will change when the underlying asset’s price moves.

For call options, this indicator ranges from 0 to 1. For example, a value of 0.6 means: if the asset’s price increases by $1, the option’s value will increase by $0.6.

The term “neutral” in this context implies independence from market conditions. Accordingly, the strategy is built so that the total portfolio value remains unchanged regardless of price jumps.

This effect is achieved through balancing: the trader opens opposite positions(for example, buys the asset on spot and opens a short on futures). As a result, profit from one trade fully offsets the loss from the other.

Below, we will discuss one of such strategies — funding rate arbitrage (Funding Rate Arbitrage). This tool allows earning stable passive income through regular funding payments, while avoiding volatility risks of the underlying asset.

Perpetuals, funding rates, and cash-and-carry arbitrage

Let’s dive into the terminology again.

Perpetual futures (perpetuals, “perps”) are contracts without an expiration date. Unlike traditional futures derivatives, they use a funding rate mechanism to anchor quotes to the spot market.

Traders earn on them similarly to regular futures — by correctly predicting the price direction. Additionally, funding opens opportunities for arbitrage and passive income.

What is a long position?

Opening a long position (long) on a perpetual contract, the trader bets on the increase in the asset’s value.

If demand is high, the derivative trades at a premium — more expensive than on the spot market. Conversely, when sellers dominate, the contract’s price drops below the market value of the underlying asset, forming a discount.

Example: Bitcoin’s spot price is $83 000, and the perpetual contract trades at $83 500. The difference is $500 — a premium reflecting buyer dominance. The trader does not pay this amount separately; it is already included in the quote.

For the trade to be profitable, the price must surpass the entry point (500$83 and stay above. Understanding this price difference is necessary for working with the funding rate, which will be discussed further.

) What is a short position?

Opening a short position ###short(, the trader plays on decline, selling a perpetual contract.

The mechanism is as follows: the user opens a futures account on the exchange and deposits collateral )margin(. Suppose the own capital is $1000. Using 10x leverage allows opening a position of )000.

Example: a short of 0.2 BTC is opened at $10 000. If the price drops to $50 000, the contract is bought back.

Result calculation: $45 50,000 − 45,000( × 0.2 = ) Profit will be $1000 $1000 excluding trading fees and funding rate(.

) What is the funding rate?

The funding rate ###funding( is a mechanism of periodic payments between traders holding long and short positions in perpetual futures. The indicator’s value varies depending on market conditions.

The funding mechanism is necessary to tie the contract’s price to spot quotes. If the futures trade higher than the underlying, long position holders pay sellers. Conversely, when the contract’s price is below the market, short holders pay buyers.

Example: Bitcoin’s spot price is )000. If market sentiment is bullish, the perpetual contract’s price can significantly exceed this level.

In this case, long $50 long( traders start paying a fee to short sellers — usually every eight hours. This increases costs for holding a long position, stimulates sales, and ultimately brings the futures price back to market equilibrium.

The mechanism also works in reverse: if seller pressure drives the contract’s price below spot, payments are made to short )shorte( holders.

This mechanism prevents manipulation and ensures futures quotes reflect real market conditions, minimizing price discrepancies.

) Arbitrage opportunities

Funding creates conditions for delta-neutral earnings: a trader can buy the asset on spot and simultaneously open a short on futures. This strategy yields income due to positive funding rates.

Let’s consider the possibility of passive earnings using the above approach:

1. You buy the asset ###for example, Bitcoin( at the price )000.
2. Simultaneously, you open a short on a perpetual contract for the same amount at the same price.

As long as derivative quotes exceed the underlying asset’s price, short position holders receive funding payments every eight hours. But if market sentiment turns bearish and the futures fall below spot, payments will go to shorts.

@E3# Scenario 1: Bitcoin rises above $83 000

Suppose the price reaches ###000. In this case, a spot position of 1 BTC is worth $83 000, profit $2000$85 .

Short on the perp contract: loss -$85 (since entry was at )000$2000 .

Price outcome: ($83 profit offsets loss).

Result: you receive funding payments.

Suppose the rate is 0.03%, payments are made every eight hours, and the position size is $0 000:

Payment per period: 0.03% × (000 = )

Daily income: $10 × $10 24/8$3 = $9.

Monthly income: $270.

@E3# Scenario 2: Bitcoin remains at $3 000

Spot position still valued at (000, as is the futures position.

Price outcome: )###quotes unchanged$83 .

Income: $83 per day or $0 per month due to positive funding.

@E3# Scenario 3: Bitcoin drops below (000

Suppose the digital gold’s quotes fall to )000. The corresponding value will be for the spot position as well. In this case, the loss will be $9 .

Short: profit +$270 ###entry at $83 000, current price $80 000$3000 .

Price outcome: $3000 (loss offset by profit$83 .

However, the investor still earns as long as the funding is positive.

$80 Why does this work

The strategy neutralizes price risk, bringing it to zero, and allows earning solely from the funding rate. The approach is most effective in bullish or sideways markets.

The main condition for the model’s operation is positive funding: a situation where, due to the dominance of long positions, perpetual contracts trade at a premium to spot.

) Possible risks

If the futures trade below spot, the funding rate turns negative. In this case, the obligations fall on those who opened shorts — a scenario typical for a bearish market.

Besides market conditions, it is important to consider associated costs. First, exchange commissions “eat” part of the profit. Second, working with leverage involves the risk of liquidation: a strong price movement can wipe out the position if the investor does not follow risk management rules.

Thus, the approach is justified only when a stable positive funding rate persists in the market.

Automated strategies

To automate delta-neutral strategies, some platforms offer ready-made solutions. For example, Binance provides the Smart Arbitrage option.

![]$0 https://img-cdn.gateio.im/social/moments-051b66a35577e7e529ecb73ae738f787(Smart Arbitrage section of Advanced Earn. Source: Binance The algorithm automatically opens counter positions: buys the asset on spot and shorts the corresponding futures. This relieves the investor from manual operations. As long as the funding rate remains positive, the bot accumulates payouts from long holders.

However, representatives of the exchange warn: sharp price jumps or a shift of funding into the “negative zone” can affect profitability.

Launching the strategy is simple: just select the asset )available BTC, ETH, SOL, XRP, and DOGE###, specify the amount in USDT, and click Subscribe. You can monitor the status or close the position via the Redeem button in the Earn menu.

BFUSD

There are instruments in the market initially built on delta-neutral strategies. An example is BFUSD — a “yield” stablecoin for Binance Futures users.

It allows traders to increase capital efficiency: funds can be used as collateral for positions while earning passive income on them.

![]###https://img-cdn.gateio.im/webp-social/moments-98a22fa423af92e02897c1d2963c9753.webp(As of 02.01.2026, the annual yield of BFUSD is 4.77%. Source: Binance To receive daily USDT accruals, hold BFUSD in the USDⓈ-M Futures wallet. Using the asset in trading operations increases profitability.

Payments are supported by the exchange’s investment strategies. Funds earned from selling BFUSD are used to buy and stake Ethereum, and price risks are hedged via delta-hedging.

Rewards are divided into two categories:

• basic rate: accrued for simply holding the asset in the balance;
• enhanced rate: available to active traders using BFUSD in trading operations.

To protect users from periods of negative funding )when hedging becomes unprofitable(, a special reserve fund — BFUSD Reserve Fund — was created.

USDT can be exchanged for BFUSD in the Binance futures section. To use the asset as collateral for opening positions, enable the Multi-Asset Mode )Multi-Asset Mode(.

Simple DeFi strategy: farming hedge

This approach is applicable, for example, to “hot” market news tokens. Such tokens often provide high APR in staking but usually suffer from high inflation and selling pressure due to regular unlocks.

Suppose there is a liquidity pool or staking opportunity for a token )for example, TOKEN(, offering 50% annual yield amid falling prices.

Approximate action plan:

• the investor buys TOKEN — say, for 1000 USDT;
• deposits tokens into a pool with 50%;
• opens a short on the “hot” asset on the exchange for the same 1000 USDT )with 1x leverage(.

) Result

The investor earns a 50% yield in project tokens. The loss from depreciation of the deposit body is fully offset by profit from the short position.

( Risks

In case of a sharp decline in quotes, the funding rate on the short can spike sharply. In such a case, the costs of maintaining the position may exceed the farming profit, making the strategy unprofitable.

Before entering the trade, it is important to ensure that the staking APR covers the annualized funding rate.

) Alternative approach

Instead of buying the asset, one can use lending. For this, the market participant blocks collateral in a lending service, borrows the target token, and uses it to generate income.

In the end, they return the debt body and take the collateral, keeping the earned interest.

***

The strategies discussed allow for stable income even in high volatility conditions. However, it is important to remember: delta-neutrality hedges the portfolio only against exchange rate fluctuations.

This approach reduces risks but does not eliminate them entirely. Investors can still face liquidations, inconsistent losses, and the need for complex rebalancing.