What does it mean to double the coin-standard short position and eat up the capital fee?

Coin-based short selling is a cryptocurrency contract trading strategy. The profit of this strategy depends on the price changes in the contract market and the funding fee. Currently, currency standard is one of the most popular trading methods in the cryptocurrency market. Coin standard means that investors need to hold the corresponding currency before they can participate in the transaction of the contract market. For example, for the BTC/USDT currency standard contract, users need to Transfer BTC to act as margin. Briefly introduce what it means to double the coin-standard short selling and eat the capital fee? There may be some people who don’t understand, so I’ll explain it in detail below.

#What does it mean to double the currency standard short position and eat the capital fee?

Coin-based one-time short selling and capital fee refers to that in the cryptocurrency contract market, investors use one-time leverage to short-sell. By holding this short position, they can obtain additional income or pay fees through the capital fee mechanism.

One-time shorting refers to investors taking leveraged short positions in the contract market, and the leverage multiple is 1 time. This means that the investor sells an amount of contracts equal to the amount of cryptocurrency held in their account, so the value of their position is equal to the value of the cryptocurrency in their account.

Funding fees refer to the fees that traders need to pay or receive when holding short positions in the contract market. This mechanism is designed to help equalize the difference between the price of the contract and the price of the underlying asset. When the contract price deviates from the price of the underlying asset, traders holding opposite positions will pay or receive funding fees from traders holding opposite positions to ensure the smooth operation of the market. The calculation of funding charges is usually based on the difference between market interest rates and contract prices, which is of great significance for traders to conduct risk management and arbitrage transactions in the market. By understanding and effectively utilizing the funding fee mechanism, investors can better grasp market changes and improve the effectiveness of trading strategies.

Is double shorting the currency standard a hedging?

Coin-margined shorting is not always a hedging strategy, because hedging usually requires holding opposite positions at the same time to reduce risk. The actual strategy an investor adopts depends on his or her overall portfolio and trading approach. Sometimes investors may use coin-based shorting to hedge other investments. Therefore, the choice of hedging strategy should be determined based on individual circumstances and market conditions to best protect the portfolio against risk.

For example, the following 2 types:

1. Overall market hedging:

Investors usually hold long positions in their portfolios in the hope that the market will go higher. In order to effectively hedge the overall risk, they may choose to open a "1x short position on the currency basis" in the cryptocurrency contract market to balance the overall risk.

2. Market sentiment hedging:

Investors may believe that the market may fall, but they also hold other assets. In this case, they can hedge against potential downside risks by opening a “coin-based short” position in the cryptocurrency contract market.

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