How Can a DAO Use Inverse Perpetual Swaps to Manage Risk on non-USD Denominated Assets?
An inverse perpetual swap is a contract collateralized and settled in the base cryptocurrency (e.g. BTC/USD inverse swap is margined in BTC).
A DAO holding a large amount of a non-USD asset, like its native token, can use an inverse swap to hedge the USD value of that asset. By shorting the inverse swap, the DAO locks in a future USD value for its base asset, effectively mitigating the risk of the base asset's price dropping relative to USD.
Glossar
Inverse Perpetual Swaps
Instrument ⎊ Inverse Perpetual Swaps are derivative contracts where the payoff is inversely related to the price of the underlying asset, often used to hedge long exposure or express a bearish view without directly shorting the asset itself.
Inverse Perpetual
Contract ⎊ This specific perpetual derivative is structured to move inversely to the price of the underlying asset, offering a synthetic short exposure without traditional futures expiration.
USD
Valuation ⎊ The United States Dollar, within cryptocurrency and derivatives markets, functions as a primary settlement currency, influencing the pricing of digital assets and the collateralization of derivative contracts.