SBF found guilty

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The Blends Briefs
TL’DR: Here’s a sneak peek into today’s newsletter

• 6 Top Hedging Strategies.

• SBF found guilty.

• OpenSea cuts half of its employees.

• Dubai approves XRP and TON.

• Mining Bitcoin from Dead Cow in Argentina.

• Dictinomics: Hedging a Risk.

A must-have
6 Top Hedging Strategies.

In our previous issue, we highlighted how to create a mass adoption for cryptocurrencies, and we briefly mentioned Hedging strategies as one of the factors that need to be addressed. Today, let’s dive deep into this. Hedging is a risk management strategy that aims to reduce exposure to price fluctuations and volatility in the crypto market. There are various hedging strategies that crypto investors can use, depending on their risk appetite, goals and preferences. Here are some of the top six crypto hedging strategies:

1. Diversification: This involves investing in a mix of different crypto assets that have a low or negative correlation with each other. This way, the portfolio can benefit from the growth of some assets while minimizing the losses from others. Diversification can also include investing in other asset classes, such as stocks, bonds, gold or real estate, to reduce the overall volatility of the portfolio.

2. Futures and options: These are derivative contracts that allow investors to buy or sell a crypto asset at a predetermined price and date in the future. Futures and options can be used to hedge against adverse price movements by locking in a favourable price or by profiting from the difference between the spot and contract prices. For example, if an investor owns bitcoin and expects its price to drop, they can sell a bitcoin futures contract to secure a higher price than the market price at a later date.

3. Stablecoins: These are cryptocurrencies that are pegged to a stable asset, such as the US dollar, euro or gold. Stablecoins can be used to hedge against the volatility of other cryptocurrencies by providing a stable store of value and a medium of exchange. For example, if an investor wants to reduce their exposure to bitcoin, they can convert some of their bitcoin holdings into stablecoins and hold them until they want to re-enter the market.

4. Short selling: This involves borrowing a crypto asset from a lender and selling it in the market, hoping to buy it back at a lower price and return it to the lender. Short selling can be used to hedge against a decline in the price of a crypto asset or to profit from its bearish trend. For example, if an investor believes that Ethereum is overvalued, they can short-sell Ethereum and make money if its price falls.

5. Crypto insurance: This is a service that provides coverage for losses or damages caused by various risks in the crypto space, such as hacking, theft, fraud or technical issues. Crypto insurance can be used to hedge against the operational risks of holding or trading cryptocurrencies by providing compensation or reimbursement in case of an unfortunate event. For example, if an investor stores their crypto assets in a custodial wallet or exchange that gets hacked, they can claim their losses from their crypto insurance provider.

6. Dollar-cost averaging: This is an investment strategy that involves buying a fixed amount of a crypto asset at regular intervals, regardless of its price fluctuations. Dollar-cost averaging can be used to hedge against market volatility and timing risk by averaging out the cost basis and reducing the impact of short-term price swings. For example, if an investor wants to invest $1000 in Bitcoin over 10 months, they can buy $100 worth of Bitcoin every month instead of buying $1000 worth of Bitcoin at once.

Global Biscuits

SBF found guilty.
Sam Bankman-Fried, the former CEO of FTX, has been convicted on all seven charges in his fraud trial, marking a significant moment in cryptocurrency regulation. The verdict, which came after extensive deliberation, found him guilty of defrauding investors through deceptive practices related to FTX's operations.

The court has scheduled a tentative sentencing date for March 28, 2024. Given the severity of the charges, Bankman-Fried faces a lengthy prison sentence that could span several decades, with the possibility of up to 115 years as per federal sentencing guidelines. Questions remain about whether he will serve the full term and what options for appeal may be available to him. His defence team has indicated plans to appeal, citing concerns over the fairness of the trial and arguing for his innocence.

The case against Bankman-Fried has brought forth critical discussions on the oversight of digital assets and the enforcement of financial regulations within the crypto industry. The implications of this trial extend beyond Bankman-Fried's personal fate and highlight the need for clarity and accountability in the rapidly evolving crypto market.

OpenSea cuts half of its employees.
NFT marketplace OpenSea is undergoing significant changes, with CEO Devin Finzer announcing a workforce reduction of 50% as part of the company's shift towards "OpenSea 2.0." This restructuring aims to prioritize product upgrades in areas like technology, reliability, speed, quality, and user experience. The decision to cut staff follows feedback from users, who expressed that OpenSea had become more of a follower than a leader in the NFT space. The company is committed to remaining attentive, nimble, and focused as it embarks on this new direction. OpenSea's market share has decreased in recent months, facing competition from other NFT platforms. While OpenSea once held over 73% of the NFT marketplace volume as of October of 2022, its share has since fallen to 18% as of Nov. 3, The Block's Data Dashboard shows. 

Tastes of the regions

Dubai approves XRP and TON.
The Dubai Financial Services Authority (DFSA), the financial regulator in the Dubai International Financial Centre, has approved the listing of TonCoin (TON) and XRP. They now join Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) on the list of approved cryptocurrencies for financial transactions within the DIFC. Ripple opened its Middle East and North Africa headquarters in DIFC last year, and this approval is seen as a positive step in promoting the use of digital assets and positioning Dubai as a leading financial hub. Dubai introduced a regulatory framework for virtual assets and related activities in February 2023, providing clarity and guidelines for the use of cryptocurrencies and establishing sanctions for non-compliance. Additionally, the TON blockchain recently set a world record during public testing by processing over 104,000 transactions per second.

Mining bitcoin from Dead Cow in Argentina.
Argentine presidential candidate Sergio Massa's suggestion to use surplus natural gas from the Vaca Muerta (Dead Cow) oil field for Bitcoin mining has sparked debate in the cryptocurrency community. While some argue that the proposal could utilize excess gas productively, Bitcoin miners and advocates express skepticism about the government's involvement in the complex and competitive mining sector. Despite support from some quarters, concerns about profitability, expertise, and investment risks have emerged, leading to suggestions for the government to facilitate private mining ventures instead. This proposal indicates a growing embrace of Bitcoin in Argentina, but many believe that the risks associated with state-led Bitcoin mining outweigh the potential advantages, emphasizing the private sector's better capacity to leverage opportunities from Vaca Muerta's natural gas resources.

Dictionomics
Hedging a Risk 

Hedging a Risk is a strategy that aims to reduce the exposure to an unfavourable outcome of an uncertain event. For example, an investor who owns a stock may hedge the risk of a price decline by buying a put option, which gives the right to sell the stock at a predetermined price. Hedging can also be used to protect against currency fluctuations, interest rate changes, commodity price movements, and other types of risks. Hedging can reduce the potential losses from adverse events, but it also involves a cost and may limit the potential gains from favourable events.

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