Hold a coin and buy a put on it, and you have set a floor. Below the strike, further declines are offset. The unbounded downside becomes a bounded one, and the cost of that is the premium, paid whether or not the protection is used.
The general mechanics are the same as protective puts anywhere. What differs is the pricing and the calendar.
Crypto protection is expensive, for a reason
Implied volatility is higher here than in equity indices because realised volatility is higher. So the same percentage of downside protection costs materially more, and the drag on a continuously hedged position is correspondingly larger.
That is not a mispricing to be arbitraged. It is the market charging appropriately for an asset that moves more — and it means “always hedged” is a much more expensive posture in crypto than in equities.
The one that is genuinely cheaper
Downside protection in a call-heavy book can be relatively less expensive than the equity intuition suggests, because the structural demand is on the other side. In equity indices everyone wants puts and puts are bid; in crypto the crowd is often buying calls.
So the trader who wants protection is, some of the time, on the unpopular side of the book — which is the side that usually pays less. Whether that holds depends on the regime, which is why skew has to be read against its own history rather than an imported prior.
Two crypto-specific advantages
No assignment. European style and cash settled means the hedge never turns into an obligation to deliver coins — see European style and cash settled. The hedge settles in cash and your spot position is untouched.
Precise horizons. With an expiry every day, protection can be bought for exactly the period of concern instead of rounding up to the next monthly. Hedging one weekend, or one scheduled event, is straightforward here in a way it is not in most markets.