Definition ∞ Risk Hedging involves employing strategies to offset potential losses from adverse price movements in an investment. In cryptocurrency, this might include using derivatives like futures or options, or diversifying a portfolio across different assets to reduce exposure to volatility. The goal is to protect an existing position from unfavorable market shifts. It serves as a defensive measure to limit financial downside.
Context ∞ News articles frequently discuss Risk Hedging strategies as market participants seek to navigate the inherent volatility of digital assets. Reports often highlight various methods, such as stablecoin allocations or short positions, used by investors to mitigate market downturns. Understanding risk hedging provides insight into how sophisticated traders manage their exposure in a dynamic and unpredictable environment. It is a critical component of prudent portfolio management.
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