Market makers hedge by balancing inventory risk between spot and derivatives markets.

If a market maker accumulates long spot inventory (for example, by providing bid-side liquidity and being lifted), they may open short positions in perpetual futures to neutralize directional exposure. Conversely, if they are net short spot inventory, they may go long perps to hedge.

This cross-venue hedging allows them to:

• Maintain tight spreads without taking outright directional bets
• Capture bid/ask spread while minimizing price risk
• Arbitrage funding rate imbalances
• Align exposure dynamically as order flow shifts

In practice, hedging is continuous. Inventory, funding rates, volatility, and depth of liquidity all influence how aggressively exposure is offset.

Professional MMs are not speculating on price — they are managing delta while monetizing microstructure inefficiencies.