AutoHedge, the newest tool offered by Autonomy Network, serves as a decentralized application designed for liquidity providers to optimize their gains, hedging against volatility.
What Happened: On June 15, Autonomy Network introduced AutoHedge, a Web3 product that works to produce delta-neutral positions, by leveraging the Autonomy Protocol.
AutoHedge works by using Autonomy’s smart contract automation layer to create delta-neutrality. Designed for risk-averse investors to enter DeFi, AutoHedge will allow users to hold investment strategies that do not have a changing dollar value over time (i.e. are delta-neutral).
The network’s AH LP token uniquely offers zero risk of liquidation when one borrows, as it is supported by double the debt value. For example, if hypothetically the price of Ethereum ETH/USD went to 0, the investor would gain the same from shorting the token, as they would lose in their Uniswap UNI/USD LP, due to a 100% collateral ratio. On the other hand, in the case of a rise in the token’s price, the user’s position would remain fully collateralized.
Why It’s Important: AutoHedge realizes that large-scale institutional investors possess major funds that can be deployed to create liquidity in DeFi. However, because of regulatory barriers, these investors are not exposed to the price volatility risk.
The tool is fundamentally created to always gain a return on the investment, profiting off trading fees without actual exposure to the asset’s price volatility, while allowing large-scale capital to flow into the DeFi space.
“AutoHedge is the perfect product for a bear market for investors as it makes them completely immune from the prices of e.g. ETH going down, while still enabling them to benefit from LPing with volatile assets,” said James Key, CEO and Founder of Autonomy Network.
“[It] represents the first time that an entire trading strategy can be automated and tokenized to be used in other DeFi applications, such as being yield-bearing low-risk collateral for stablecoins – this is just the tip of the iceberg and isn’t just a new product, but an entirely new category of DeFi.”
