DeHedge aims to create hedging tools for the cryptocurrency and ICO market.
Hedgers are provided with the opportunity to insure their investments against fluctuations in cryptocurrency and token prices. Reducing the risks also lowers the potential profits. In case of an insured event, an investor shall be reimbursed their investment less the insurance premium. The investor’s maximum loss will therefore be equal to the cost of the latter.
DeHedge supports two insurance strategies:
Hedging Initial Token Offerings
An investor getting an insurance coverage for the purchase price of project tokens pays the insurance premium to receive the right to sell the tokens at the same price later on. This works in the same way as a PUT option in a financial market, giving the option holder the right to sell an asset at a predetermined price. But, in case of DeHedge, the rights and obligations of the parties are different. Only DeHedge has the obligation to buy back a project token in case of an insured event. The token owner, on the other hand, has the right, but not an obligation, to exchange the token for the insurance premium.
Insurance coverage for primary token offerings is unlike any instrument on the financial market.
Hedging Publicly Traded Project Tokens
Hedging involves buying or selling a limited options contract on a crypto exchange.
An options contract (also known as option) is a derivative financial instrument that gives the buyer the right, and the seller the obligation, to buy/sell a certain asset at a predefined price later on. For this right, the buyer pays the so-called option premium. A DeHedge contract defines the insurance period and the range of prices for insured tokens. Similarly to ICO insurance, DeHedge has the obligation to buy back the token in case of an insured event.