Hedge funds are making more inquiries about using cryptocurrency trading platforms for arbitrage strategies that connect traditional financial instruments with digital-asset markets, according to Catherine Chen, head of VIP and institutional at Binance. Speaking during Token2049, Chen described early interest in trades involving products such as cash equities and perpetual futures, where firms seek to capture price differences between related markets.
Chen said the activity remains in an exploratory phase rather than a broad migration of hedge-fund trading into crypto venues. She placed the likely period for judging whether that engagement develops into a more established market at 12 to 18 months, and did not disclose how many firms have begun trading or evaluating the strategies.
The comments point to a narrower institutional use case than a simple increase in directional cryptocurrency exposure. Arbitrage firms generally aim to profit from temporary price gaps between linked instruments, often hedging one position with another rather than relying on an outright rise or fall in an asset’s value. In the model Chen described, the opportunity comes from connecting markets that have historically operated through separate trading, settlement and operating schedules.
24/7 markets draw attention to price gaps
Chen identified deeper available liquidity, continuous trading and weekend price discovery as reasons behind the increased interest. Crypto venues trade around the clock, while many established financial markets close overnight and for weekends. That difference can create periods in which prices move in one market before related instruments reopen elsewhere.
Perpetual futures are contracts designed to track an underlying asset without a fixed expiry date. They are common in crypto markets and can give traders a way to take long or short exposure, or to hedge another position. When tied to traditional financial assets, these products could give market participants another venue for expressing or offsetting exposure beyond conventional exchange hours.
A workable arbitrage trade depends on far more than identifying a difference in quoted prices. Firms need enough market depth to enter and exit both sides of a position without eroding the expected return through slippage, the change between an expected execution price and the actual fill. They also need reliable collateral arrangements, clear product terms and risk controls that account for sharp moves while one market is closed.
Chen said liquidity has often been inadequate when comparable instruments are offered through second- or third-tier venues, or through decentralized finance platforms. That constraint limits the number of trades that can be executed at scale and can leave firms exposed if they cannot quickly close or hedge a position. A quoted gap may appear attractive but become unusable when the available size is small or trading costs widen under pressure.
Hybrid portfolios are forming on the other side
Chen also described movement in the opposite direction, with crypto-native clients adding products linked to traditional finance as they build portfolios that combine digital assets with more familiar market exposures. She did not provide figures on the number of clients using those products.
That crossover could change how some crypto-focused trading firms manage risk. A portfolio built solely around digital tokens can be heavily exposed to crypto-specific volatility, liquidity cycles and funding conditions in derivatives markets. Access to instruments tied to equities or other traditional assets may offer additional hedging choices, though the risks of the underlying products and the platform offering them remain central.
Chen said tokenization and cross-asset trading are still at an early stage, with no single market standard yet used across institutions and traders. Tokenization generally refers to representing an asset or claim on a blockchain-based system. In cross-asset trading, the challenge is less about creating a digital representation than establishing consistent rules for pricing, collateral, custody, settlement and legal ownership.
Those details can determine whether a product is useful for professional trading. Two instruments may appear to track the same asset but differ materially in how they are settled, what backs them, who issues them, how corporate actions are treated, and whether they can be transferred or redeemed. Arbitrage depends on those links being dependable when markets are moving quickly.
Regulation will shape the trade
Chen said regulatory clarity will be a major factor in the development of trading between traditional and crypto-native markets. Rules affecting derivatives, tokenized assets, custody, capital treatment and market access can shape which firms are able to participate and which products can be offered in particular jurisdictions.
For hedge funds, the appeal of crypto platforms in this context lies in their potential to extend the trading day and provide alternative routes for hedging or price discovery. The barriers are equally practical: a strategy requires sufficient liquidity, durable market infrastructure and products whose legal and economic terms are understood across the firms involved.
Chen’s 12-to-18-month horizon reflects that these are not yet routine institutional workflows. The next stage will depend less on attention around tokenization and more on whether venues can support consistent execution, risk management and settlement for cross-market trades when price discrepancies emerge.
Explore how tokenized stocks reshape arbitrage between TradFi and crypto—read this in-depth guide on tokenized equities next.
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