3 DeFi Protocols That Can Help You Hedge Against Market Conditions

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Crypto’s promise of financial freedom should not be taken lightly. Even though the world is yet to wake up to the possibilities cryptocurrencies can offer, we can see and use a lot of them today.

Hedgey Finance

Hedgey is a very simple way to gain access to options trading and OTC deals in crypto. For now, Hedgey supports assets on Polygon, Harmony One, Fantom and Gnosis (xDAI).

OTC deals are still in an experimental phase but the general idea behind them is already known. Users can post OTC deals and bypass any centralized or decentralized exchange. This mechanic allows for larger trades to take place at a fixed price leaving the price chart unaffected by a one or many large trades.

Options trading can be done by using the treasury pools. Here users can purchase options from a protocol-owned pool and bet on future prices of certain assets.

Selecting the “singles” option allows you to purchase options contracts from individual contract sellers.

Lyra Finance (Optimism)

If you need a reason to try out Optimism on Ethereum, Lyra Finance can be one. Apart from instant and “cheap” transactions, you can purchase customizable options contracts on Lyra in a few easy steps.

Cryptocurrency options supported by Lyra include Bitcoin, Ethereum, Chainlink and Solana. All options are bought with USDC and if you need some you can get it on Uniswap since it is also available on Optimism.

The easiest way to get some ETH over to Optimism is through Hop Exchange.

Polymarket

Polymarket is a completely different protocol but it can still serve the same purpose. The platform lets you place bets in a decentralized manner and they can range from politics to sports, science and even chess…

On the surface, it may seem like just another betting platform but the fact that you can bet on future Oil or Gold prices makes it an options trading platform as well.

All bets are collected in one pool and paid out proportionally to the winners. However, you can cash out at any given moment until the event ends and the bet expires. Polymarket is available on Polygon and the only accepted currency for now is USDC which needs to be deposited into your personal wallet on Polymaket.

How Can Options Help You Hedge Against Market Conditions

Purchasing a call or a put is basically the same as opening a leveraged long or short on an exchange. The only difference is that calls and puts can’t be liquidated no matter how high or low the price goes.

This can be very useful when you are forced to sell some crypto or when you feel underexposed to crypto.

In an event where you need to cash out a position that you would rather continue holding, you can “insure” yourself by allocating some of those funds toward a call option. This way you stay exposed to the upside potential while paying less than what you would normally have to pay for that specific position. The only problem is that options have expiry dates so make sure to plan accordingly.

Betting platforms like Polymarket can also be very useful for hedging. Most crypto investors don’t have access to Gold and Oil markets but crypto is changing that with synthetic assets like PAX Gold. Obviously, these assets require trust in the issuer and if you aren’t willing to take that risk but still want to be exposed to Gold you can simply place a bet on future prices.

It can’t replace option trading but it is an avenue that gives you access to almost any market in the world.