Bumpering Your Crypto: Simplified Web3 Risk ManagementSponsored
Reduce Crypto Risk And Maintain Upside Exposure With Bumpered Assets
By: Jeremy Nation • Loading...DeFi Explainers
In the world of risk management, the renowned Black-Scholes formula, created by Princeton professors Fisher Black and Myron Scholes, stands as an indisputable force, shaping a staggering $13 trillion Options market and earning the Nobel Prize in Economics.
Its influence on risk assessment remains unparalleled—until now.
Bumper introduces a radical innovation that redefines risk management with different formulas, inputs, and a novel rebalancing mechanism.
“Although Bumper takes a radically innovative approach to risk, using different formulas, inputs and a novel rebalancing mechanism, it is freakelly correlated to Black-Scholes,” said company CEO, Jonathan DeCarteret.
“To our knowledge, no one has ever done that in 50 years since it was published. Most importantly, although correlated, our backtesting showed that Bumper users paid 9.3% cheaper premium than buyers of traditional put options” said DeCarteret.
Crypto Risk Management
The prospect of being on the right side of a crypto market rally has enticed swarms of participants into the space, but during bear market conditions, how can those with digital assets protect themselves against losses while maintaining exposure to upturns?
Risk management options in crypto are somewhat limited. Central exchanges or DeFi plugins that facilitate stop losses are a means for traders to avoid losses when volatility strikes markets, but the process of converting positions into a stablecoin such as USDC and back can be time-consuming and expose traders to costly slippage.
Once a position is swapped out of a volatile crypto asset into a stablecoin, users must monitor markets and time reentry right to catch an upswing. The unpredictability of price movement and the lack of robust rebalancing tools leaves little room for error and much for improvement.
For the sophisticated trader, market variability demands a more dynamic means to manage positions, that provides exposure to the upside of markets while protecting against bearish conditions.
Bumper simplifies crypto risk management by allowing traders to set price protection floors and pay premiums to insure their digital assets against market crashes.
On the other side Bumper’s protocol gives traders a chance to deposit stablecoins and earn yields derived from premiums and automated yield farming in the Bumper Capital Pool.
This August, Bumper is set to launch initial support so that users may protect their ETH against market downturns.
Bumper Your ETH
A trader with bumpered crypto doesn’t have to worry if the market suddenly crashes. That’s because they know that they can cap losses and redeem value in a stablecoin at whatever floor they set, less platform fees.
Simply select an asset, an amount of the asset to protect, and a term for the desired floor. Bumper will launch initial support for ETH this August.
Once the policy is set, confirm it by staking Bumper’s native BUMP token, to lock up assets, and receive in return a fully liquid-bumpered version of the crypto that, in the future, can be sold, traded, or leveraged across DeFi protocols.
Protection terms cover periods of 30, 60, 90, 120, and 150 days. All the market action can be tracked in the Bumper dashboard which shows policy positions and fees.
Redeeming Bumpered Assets
When market conditions are favorable and assets remain above the policy floor, traders see 100% of the upside. Amid this climate, a policy that covers 100 ETH will return 100 ETH, minus any fees, when the policy is redeemed.
But what happens when markets go down? Bumpered ETH remains protected against sudden crashes throughout the policy term. When prices dip, redeem the amount the policy covers, less platform fees.
So a policy covering 90% of a portfolio of 100 ETH at the current price floor of $1887.00 would provide a $169,830 USDC payout if redeemed when markets dipped, for instance 30% below that price.
With the market down, the above policy effectively caps a trader’s losses at 10%, just under $18,870 equivalent, plus the Bumper fee. In total Bumper saves the trader around $37,000 compared to another trader’s un-bumpered ETH portfolio which is fully exposed to falling prices and incurs losses equal to $56,610 in the same market.
Adaptable Amid Market Shifts
Each Bumper policy stays locked for a term period selected in the dApp. Redeem and reset protection levels as needed to capitalize on price volatility, cut costs by lowering a protection floor, or sleep easy with the extra padding of a higher protection floor.
When a fixed term on a policy comes to a close it transitions to a flexible position, which can be claimed or closed at will.
Deposit And Earn
Balancing bumpered assets is the Bumper Capital Pool that offers stablecoin depositors payouts via policy holder premiums and exposes them to automatic yield rewards from repurposed surplus funds.
To contribute to the pool, depositors must set a risk tolerance, and term rates, and stake stablecoins to the pool. In addition an amount of BUMP tokens must be bonded which will be returned when the position closes.
The Bumper pool architecture decentralizes asset risk, spreading it out across all pool participants based on those parameters.
When Bumper launches in August it will initially roll out support for USDC depositors.
Bumpered ETH Coming This August
With Bumper traders have the option to protect their assets from market volatility, and capitalize on their foresight, or earn rewards by depositing stablecoins to secure the protocol.
Learn about BUMP token’s new user incentives, available at launch, by joining the Bumper community and registering for more details.
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