In the highly volatile Crypto Assets market, knowing how to hedge risks is like buying yourself an "insurance". Whether you hold Bitcoin, Ethereum, or other digital assets, learning the skill of hedging can protect your hard-earned money when the market falls.
What exactly is Hedging? Understanding financial concepts through everyday examples.
Hedging is essentially the art of risk management. Imagine you bought a house in an area prone to flooding; just in case, you would purchase insurance for the house. The principle of hedging in the crypto assets market is the same—by investing in an asset that moves in the opposite direction, you can offset potential losses from the primary asset.
In traditional financial markets and the Crypto Assets field, the logic of Hedging is consistent: you hold a position in one asset while establishing an opposing position in related instruments, so that when the main asset falls, the gains from the hedging position can compensate for your losses. It sounds complicated, but the core idea is quite simple—use one hand to protect the other hand.