How to Hedge Risks with the dYdX Token

The dYdX protocol token with the ticker dYdX is the native token of the dYdX cryptocurrency exchange. Beyond that, it can be a veritable instrument for hedging risks in the cryptocurrency market.

Making profits is one aspect of investing in cryptocurrencies, while protecting your capital is another. You wouldn’t want to lose most of your funds, simply because you didn’t implement different helpful strategies for hedging risks.

You can reduce your risk exposure with the dYdX token, and here are the different ways to go about it:

1. Exercise Control Over the Risk Parameters

You can reduce your risk exposure by exercising a full control over the risk parameters for the Layer 2 Protocol. This is possible because of the empowerment of the holders of the token to exercise that control.

It will also be of interest to you to know that the token grants you the right to vote or propose changes to be made to the Layer 2 Protocol, upon which the dYdX platform is built.

2. Poll Safety

The liquidity pool is one of the major ways that the holders of the dYdX token can make passive income, as well as hedge risks.

In this case, you can use the opportunity to evaluate the possibility of making payouts on the liquidity pools, even in the event of a loss.

As to be expected, panic will set in and many dYdX token holders who already staked their tokens in the liquidity pool may be wondering how to un-stake and take their tokens.

With the control you have over this, it will be possible to confirm the safety of the payouts before processing them.

3. Capital Allocation

Allocating your capital in the form of dYdX tokens is both a medium of making passive income and hedging risks.

You can make your dYdX tokens to work for you and earn passive income by allocating them to the Market Makers. The allocated tokens will be channeled to the liquidity pools, where they would be used for facilitating transactions. At the same time, you can earn passive income, thereby, reducing your risks and making more money in the process.

4. Flexible Governance Decisions

Holding a specified unit of the dYdX token can qualify you to be a part of the governance, making and vetting proposals, based on your perspective of the said proposals.

The flexibility that comes with this is innovative, because it offers you the opportunity to participate in governance decisions that comply with the applicable laws and regulations. By doing so, it would be quite impossible for the value of the token to depreciate based on governance decisions, as the fundamentals will be positive most of the time.


You can use the dYdX token both for facilitating transactions in the dYdX exchange, as well as cutting down on your risk exposure in the market.

The dYdX Foundation is building a great project that will make tremendous contributions towards the growth of the Contract for Difference (CFD) market.

For more information contact dYDx Twitter

Author Ericks1

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