Coinhedge

Providing Hedged USD Liquidity to Blue-Chip DeFi Token Holders

Overview

Coinhedge is an innovative strategy that enables users to access USD liquidity while using their cryptocurrency holdings as collateral. The strategy provides a secure way to unlock the value of crypto assets without selling them, by creating a hedged position that protects against price volatility.

Core Functionality

Purpose

• Enables users to access USD liquidity using their crypto assets as collateral

• Maintains price exposure protection through automated hedging

• Provides a non-custodial solution for accessing liquidity

How It Works

1. Collateral Management

   • Users deposit their crypto assets (e.g., ATOM) into the vault

   • The strategy accepts these deposits as collateral

   • Assets are securely held in a non-custodial manner

2. Liquidity Generation

   • Collateral is swapped to USD through integrated DEXs:

     • Osmosis

     • Duality

     • Any Skip API integrated venue

   • USD is then made available to the user

3. Risk Management

   • Exposure is hedged on dYdX using perpetual futures

   • Automated rebalancing maintains the hedge ratio

   • Price movements are offset between spot and futures positions

Strategy Lifecycle

1. Deposit Phase

   • User deposits their crypto assets into the vault

   • Strategy verifies and accepts the collateral

   • Initial position setup begins

2. Hedge Phase

   • Strategy establishes the hedge on dYdX

   • Maintains the hedge through market movements

   • Monitors and adjusts positions as needed

3. USD Distribution

   • Generated USD is made available to the user

   • User can access the liquidity while maintaining their crypto exposure

   • Strategy continues to manage the hedge

4. Repayment Phase

   • User repays the borrowed USD

   • Strategy unwinds the hedge position

   • Collateral is returned to the user

Key Features

• Non-custodial: Users maintain control of their assets

• Automated: Strategy manages all aspects of the hedge

• Cross-chain: Utilizes multiple blockchain networks for optimal execution

• Risk-managed: Continuous monitoring and adjustment of positions

• Liquidity-focused: Provides access to USD liquidity without selling assets

Technical Implementation

The strategy operates across multiple chains and protocols:

• Neutron: Primary chain for vault and strategy contracts

• dYdX: Hedging venue for perpetual futures

• Osmosis/Duality: Liquidity venues for spot trading

• Skip API: Integration for optimal routing and execution

Benefits

1. Liquidity Access

   • Users can access USD without selling their crypto assets

   • Maintains exposure to potential price appreciation

2. Risk Management

   • Automated hedging protects against price volatility

   • Continuous monitoring and adjustment of positions

3. Flexibility

   • Multiple DEX integration for optimal execution

   • Cross-chain functionality for broader asset support

4. Security

   • Non-custodial design

   • Automated risk management

   • Transparent operations