OrBit Markets Unveils Impermanent Loss Protection for DeFi Market
Posted by Colin Lambert. Last updated: September 8, 2022
Digital assets options and structured products liquidity provider OrBit Markets has launched an Impermanent Loss (IL) Protection product. The option-based product provides full and exact protection against the volatility exposure associated with liquidity provision on certain decentralised exchanges, a risk known to DeFi users as “impermanent loss”.
By leveraging its expertise in financial engineering and proprietary systems, OrBit says it is able to offer this solution to safeguarding against IL. A user pays an all-in fixed premium upfront and will be fully reimbursed for the actual losses at expiry, thus IL risks are fully transferred from the user to OrBit.
OrBit says it has already executed several transactions in this product linked to Bitcoin and Ethereum, and has now expanded the range of underlying tokens to include Solana, Avalanche, Polygon and Aave.
“Re7 is a fund that provides liquidity into DeFi to shape the financial ecosystem of tomorrow,” says Evgeny Gokhberg, managing partner at Re7 Capital. “As part of this strategy, hedging the automated market-makers (AMM) impermanent loss is an important risk management challenge. With its IL protection hedge, OrBit is offering a unique and innovative product that is an excellent overlay to our investment strategy. We are looking forward to continuing to use OrBit as our counterparty for more flexible and bespoke hedging products.”
Balder Bomans, chief investment officer at Maven 11 Capital, adds, “Managing the impermanent loss exposure inherent to AMM protocols is a critical challenge for many of our portfolio companies as well as our own liquid trading strategy. When we first heard about OrBit’s solution to this problem, we immediately saw the huge potential and value-add of their product to the DeFi ecosystem, and it was a key input in our decision to participate in their first fundraising round. The team’s background in traditional derivatives trading makes them ideally placed to deliver such hedging solutions to the DeFi world.”