Definition ∞ Downside hedging involves employing financial strategies to protect a digital asset portfolio from potential losses due to adverse price movements. This risk management technique aims to limit exposure to market declines by utilizing instruments such as put options, short positions, or inverse exchange-traded products. The objective is to mitigate the impact of price drops while still allowing for participation in potential upward movements. It provides a protective layer against market volatility.
Context ∞ Discussions about downside hedging frequently appear in crypto news during periods of market uncertainty or anticipated volatility. Investors and analysts often highlight these strategies as essential tools for managing risk in the inherently unpredictable digital asset landscape. The availability and adoption of various hedging instruments are key indicators of market maturity and investor sophistication.
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