MetalSwap Knowledge - Halving Approach

Metalswap Knowledge [BLOG]-4

We have officially entered the month that will see the 4th halving in the history of Bitcoin.

This is undoubtedly one of the most anticipated events in the entire crypto world and historically, it is also an event that brings a lot of volatility to these markets.

In a previous article titled "Bitcoin Halving Volatility" we introduced this topic and today we delve a bit more into some practical use cases.

We will present strategies, both speculative and hedging, that can be implemented thanks to MetalSwap's dApp and its hedging contracts.

MetalSwap Hedging & Speculation

MetalSwap's hedging contracts are unique across all the entire DeFi space, offering the ability to open hedging swaps in a completely trustless and decentralized manner.

The primary use of these contracts is to open hedging positions, i.e., positions that negate the volatility of a certain asset and ensure the user the counterpart value of the assets for a specific period.

But that’s not all.

Another, more speculative use, however, can be implemented, even utilizing leverage. 

Thanks to MetalSwap's contracts, it is indeed possible to open positions, both long and short, with leverage up to x10, all without paying a funding rate as in perpetual contracts.

For an understanding of the basics of how this tool works, we suggest reading the article "What Is a Hedging Contract?"

Halving Hedging

Let's start by analyzing a practical case of hedging that could be implemented around the Bitcoin halving event.

But why would one want to protect themselves during this particular period?

Primarily for two reasons:

  • Fear that the price might drop, as the halving is an event that brings hype in the months before, hype could however fade in the weeks following the event, causing price to drop.

  • Fear that the price might continue to rise, and thus, if we are in the phase of accumulating this asset, it would reduce our purchasing power based on the FIAT currency value.

Thanks to MetalSwap, both these problems can be solved by locking the current price of the asset for a period chosen by the user.

If we are afraid that the price might drop after the halving and we are BTC holders, then opening a hedging position will be very simple and will look something like this:

On the other hand, if we are in the phase of accumulating the asset and fear that the price might rise around the halving, we can open an opposite position to the one previously presented, depositing a stablecoin as collateral for the position:

In both cases, we have effectively removed the volatility of the underlying asset, only changing the collateral provided for the position and with a very few risk of liquidation as we haven't used leverage.

Halving Speculation

For more speculative users who have strong beliefs that the price of BTC could rise or fall due to the Bitcoin halving, MetalSwap allows speculation on the asset's price without paying the funding rate tax.

Unlike the hedging positions mentioned earlier, being in the category of speculative users mainly involves using leverage, which on MetalSwap can go up to x10.

For example, if we are convinced that the price of BTC might drop in the coming weeks, this could be an example of a short position with x5 leverage:

Finally, if we believe that the halving will prove to be a bullish event for the price, we can open a long position with leverage as in this image:

Both the parameters related to leverage and the duration of the position are customizable by the user, who can thus create the perfect strategy for their needs.

Do It All With MetalSwap

As we can see, MetalSwap is a very versatile dApp, usable on any occasion and for very different purposes.

However, this halving mini-series does not end here, and in the next episode, we will explore strategies related to the halving but applicable to other cryptocurrencies available on the dApp, such as ETH and OP.

Share with everyone your halving strategy in our official discord!


-The DeFi Foundation


✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with Digital Assets and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.