Bitcoin hedge funds use collateral split across multiple platforms to build large positions with relatively small capital, with a fund holding one million dollars potentially controlling nine million dollars in Bitcoin exposure through borrowing and derivatives. This capital efficiency becomes a trap during price downturns, as each exchange demands collateral for its own positions without accounting for profits made on other platforms. A 20% Bitcoin crash can break a seemingly perfect hedge when forced liquidation of the losing position on one exchange leaves the fund exposed to directional price moves it was specifically trying to avoid. Ian Weisberger, CEO of CoinRoutes, cited the disorderly liquidations during the October 2025 crypto crash as an example of how dangerous this can become. CRX Trade, a Swiss institutional prime brokerage, is developing solutions to coordinate collateral management and close both sides of a hedge together before any single exchange forces an independent liquidation.
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