DeFi-Focused Asset Manager Provides Uniswap Hedging

    Simar Marwaha
    Simar Marwaha
    Published on March 15, 2023 07:45 PM

    MEV Capital employs options contracts created by OrBit Markets, a leader in cryptocurrency derivatives, to protect liquidity providers' positions and avoid losses in Uniswap (v3) liquidity pools.

    DeFi-Focused Asset Manager Provides Uniswap Hedging
    Source: Forbes

    Asset management company MEV Capital, which specialises in decentralised finance, is providing a means of safeguarding traders utilising DeFi platforms like Uniswap from experiencing impairment losses. To make the DeFi sector more appealing to institutional investors, a continual stream of innovation is being introduced, frequently modelling how traditional finance operates.

    When the assets in a liquidity pool are impacted by a decline in token values, an impairment loss happens. To protect liquidity providers' holdings and avoid losses in Uniswap (v3) liquidity pools, MEV Capital leverages options contracts offered by cryptocurrency derivatives expert OrBit Markets.

    According to Laurent Bourquin, chief investment officer at MEV Capital, the options contract is settled over-the-counter with either MEV Capital covering the balance if the liquidity providers' (LP) position has increased in value or the options desk settling the difference with MEV if the LP position is worth less than the hedged amount.

    “It's kind of trendy nowadays to do Uniswap v3 impermanent loss hedge,” Bourquin said.

    “We have hired quants to make sure the options we buy fully hedge our LP position. Everything is on-chain and public. We are using only one protocol that we trust and the yield is paid in USDC and ethereum,” he added.