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Talking points:
So I want to open this up with a quote from Jim Rohn.
I remember him saying on one of his audio programs that the ants think about winter all summer, and they think about summer all winter.
He says you can observe this in their behaviour. They never get faked out by what is happening. When it’s sunny you can see the ants desperately collecting food and storing it, because they know winter is coming even though the sun is shining bright and they could just be sunbathing.
Conversely, in the winter, they don’t despair, because they know summer is coming back soon.
With that in mind then, let’s think like an ant. Even when crypto prices are booming and the sun is shining, what can we be doing to protect our assets for if and when a crypto winter befalls us.
I started thinking about this more when I came across this new project called Bumper, which is a smart contract based insurance product that works like an option. You take out insurance and start paying a premium, and then if the market crashes, you exercise the option and the insurance pool pays out the amount of USDC that you took out insurance for.
I do not currently know of anything else that does this but maybe you guys do?
https://antimatter.finance/ “Create and trade tokenized perpetual options in a permissionless environment across major blockchains.”
But this is done without price oracles. It’s all arbitrage driven.
These work like the Binance leverage tokens BTCUP and BTCDOWN etc.
A broader question might be, what other defi or smart contract apps are out there now that can do a similar job of hedging our crypto portfolios against price volatility?
This led me to https://coinmarketcap.com/view/options/ which lists 10 different Options tokens. So that's a whole other can of worms I’d need to explore.
How do traditional options markets stay solvent? In an event of systemic collapse, there wouldn’t be enough capital in the insurance pool to cover the entire system. So what’s the deal there?
Does it just rely on (and assume) that there won’t be a systematic level event?
Is it seen as simply “we’ll cross that bridge when we come to it”?
What about using centralised derivatives like on BitMex?
What is the benefit of creating DeFi options and futures?
They say there is nothing new under the sun, and that seems to be true with crypto.
As innovative as blockchain technology is, all we have been doing for the last decade is building better versions of financial products that already exist.
Options and insurance is an age-old finance product, but now it’s just been re-imagined for a blockchain and crypto asset world.
Back to Bumper, while they may not be doing anything new conceptually, what they are doing is making a complex financial derivative like options, accessible to the average investor (which is exactly what crypto and defi is good at).
That’s really the overall opportunity of crypto, to re-invest every aspect of the traditional financial system using this new technology infrastructure, and that's why one opportunity after another keeps coming along.
▶️ 3Speak