What is a delta neutral strategy?

Delta refers to a concept widely associated with options trading. It gauges the change in the value of an option relative to the price of the underlying asset. The aim is to achieve a zero value of the delta.

Crypto traders achieve that through financial instruments such as futures. To illustrate, a positive delta created by a long position is balanced by the creation of a negative delta, i.e. a short position. This reduces the risk of a price fluctuation going down, resulting in a more consistent profit. Consider the following examples for a better understanding:

1) You want to stake a cryptocurrency at an interest rate that is good, but the asset's price may decrease during the period of staking. A way to offset those losses would be to open an equivalent short position on the futures market ( i.e., for the same amount and without leverage) for the staking period. Then, a profit from the short trade will be approximately equal to the loss from the devaluation of the staked asset. 

2) When you are planning to take part in a new project's initial public offering, the terms stipulate retaining other tokens for a certain period of time (usually the tokens of the platform where the sale is taking place). You may face a risk that the cryptocurrency you are supposed to hold might decrease in value during such a period. Following the first case, you create an equivalent short position to compensate for such risk. Once the platform's tokens are no longer needed, you close your position.

One should bear in mind that deployment of a delta-neutral strategy is complicated as it requires a deep understanding of a market. One should continuously monitor and adjust their positions taking into account things such as liquidity, volatility or regulatory changes.