Decentralized finance (DeFi) is evolving at such a rapid pace that new investment vehicles are being rolled out on a daily basis, and Opium is offering the latest.
In what it has described as “a strategy for bearish investors” the synthetic derivatives Opium Network has unveiled a product offering protection against large downwards movements in Ethereum prices.
Opium explained that its “ETH Dump Protection” is based on a “protective put” which is a strategy for investors who believe that the price of an asset will decline in the future, adding:
“It can be used by bullish investors to hedge against potential losses and get a protection to the downside,”
In a tweet on June 13, Opium stated that it works like any other decentralized insurance. Investors purchase protection for a premium and in the case that the asset drops below the strike price, they receive the difference between the strike price and the current value of ETH.
Encouraging the bears
Derivatives provide the option to short an asset, and this essentially is encouraging that action by offering rewards if the asset crashes.
“If you are bearish on an asset, you can use ETH Dump Protection as a part of the classic shortening strategy – if you believe that ETH will plummet rather than grow, purchase ETH Dump Protection and receive payouts when ETH goes down.”
The offering is part of the protocol’s Opium Insurance suite launched in December 2020 offering differing levels of protection for various DeFi strategies, smart contracts, and crypto assets.
In early April, Opium Finance partnered with Gnosis and the Universal Market Access (UMA) platform to introduce optimistic oracles that are more accurate and less prone to price manipulation.
Later the same month the DeFi protocol unveiled a “Turbo ETH” leveraging product which allowed traders to make leveraged bets on price increases.
The latest announcement from Opium was in late May for a derivatives based product to insure SpaceX launches.
OPIUM price outlook
Opium’s native token of the same name has gained 3.4% on the day to reach $2.15 at the time of press.
Its price has been steadily trending down since early February, however, and is currently a painful 90% down from its all-time high of $23.
With a circulating supply of 6.7 million tokens, OPIUM has a current market cap of $14.3 million making it a minnow when compared to many other DeFi tokens.