Onchain market volatility can lead to significant opportunities but also considerable risks. One way to manage these risks can be through hedging, a strategy to offset potential losses in one investment by taking an opposing position in another.
Most onchain tokens have limited options for risk management, but with Marginal’s permissionless infrastructure, we enable onchain traders with a myriad of defensive strategies.
Here’s a closer look at how you can use Marginal to protect your portfolio positions with hedging.
Hedging with Marginal
Take this scenario: you were an early believer in BITCOIN, and your position in the token has grown to a staggering amount. You want to derisk this position in your portfolio, as you’re sitting on a lot of unrealized profit. But you are ultimately still bullish and want to stay exposed to the BITCOIN token.
So what do you do? You turn to leverage.
Leverage enables traders to take on larger positions by borrowing capital. This can multiply profits and losses on trades.
In crypto, most users rely on centralized exchanges for leverage, but the asset selection for onchain tokens can be limited. But with Marginal, any user can gain leverage on any token onchain by borrowing tokens from our liquidity pools.
So in this scenario, instead of trying to figure out how much to realize, you can instead:
Sell half of your position.
Use the remain half of the BITCOIN position as collateral on Marginal to get a 2x long on BITCOIN.
What did you do here? Not only have you derisked your holdings, but by opening that 2x long with your remaining half, you still keep your original exposure!
If price dips, you have cash to buy more BITCOIN. If price soars from here, you still maintain a hefty position in the token.
Conclusion
By offering permissionless leverage trading for any token onchain, Marginal offers onchain users a new suite of tools to better manage their onchain portfolio.
From managing token holdings to hedging impermanent loss on a liquidity pair or simply entering a trade - there’s a strategy for everybody.
Whether you’re a long-term investor, an onchain sleuth, or a holder looking to safeguard your assets, Marginal opens possibilities beyond the binary choice to buy or sell. Instead, users get to manage their risk, optimize their exposure, and unlock new strategies that were previously out of reach for on-chain portfolios.