On-chain hedging involves using decentralized finance (DeFi) protocols and digital assets to mitigate price risk directly on a blockchain. This strategy employs various financial instruments, such as perpetual swaps, options, or stablecoins, to protect against adverse price movements of other digital assets. It offers transparent and immutable risk management solutions.
Context
On-chain hedging is a growing area within DeFi, providing users with transparent and permissionless tools for managing market exposure. News often reports on new protocols offering innovative hedging products or the increasing volume of such activities. The development of robust on-chain hedging mechanisms is vital for attracting more institutional capital and reducing overall market risk in the digital asset space.
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