For years, capturing arbitrage between cryptocurrency spot and perpetual futures markets was reserved for well-capitalized institutional traders. These “basis trades” required massive capital, sophisticated risk systems, and round-the-clock monitoring to profit from tiny price gaps. That monopoly is ending. One-click hedging vaults now automate these same strategies using decentralized exchanges and institutional custodians.
Suddenly, anyone with $100 and a crypto wallet can access market-neutral yield once exclusive to prime brokers. Players like Ethena, who offer synthetic yield, have already hit a supply of nearly $12 billion, demonstrating how real this demand is.
The implications extend beyond democratized access: as more capital flows into these strategies, speculative price gaps narrow, and savers gain stable, dollar-denominated returns without betting on volatile tokens. Adoption continues to accelerate, and it’s officially shaping an entirely new savings market, now onchain.
How market-neutral vaults work
Breaking it down in plain English, a vault opens positions in both spot (buying the actual asset) and perpetual futures (trading contracts that track the asset’s price) markets. One side profits if the asset rises, the other if it falls. When balanced correctly, the trade is neutral to price direction. Historically, executing this required collateral, large credit lines, and constant monitoring. Now, vaults handle the heavy lifting, dynamically adjusting positions to capture funding rates automatically. Some vault operators are even taking the important step in these institutional-grade strategies by leveraging systems such as Chainlink’s Proof of Reserves to provide real-time, verifiable transparency into collateral backing and execution.
Funding rates, the payments perpetual contracts make to long or short positions, are the real engine of return. They fluctuate based on demand imbalances between longs and shorts. Vaults collect these micro-payments at scale, creating a smooth, more predictable return. It is not “free money,” but a methodical, mathematically grounded way to earn yield without directional risk.
For example, if a perpetual contract on a major crypto asset trades slightly above spot, traders short the contract while holding the underlying asset. This creates a flow of funding payments from longs to shorts. A vault executes this at scale automatically, harvesting these payments.
Of course, these strategies are not risk-free. Exchange counterparty risk remains; for example, if a derivatives platform faces insolvency, user funds could be lost. Recent crypto exchange failures like FTX, Voyager, and Celsius have demonstrated that this concern is real, not theoretical. Funding rates also fluctuate based on market conditions. During bearish periods, perpetual futures can trade at discounts to spot prices, potentially generating negative funding payments.
