Using on-chain Automation to Hedge Risk

Within just the past 6 months we’ve seen a decade’s worth of black swan events unfold. Whether it be USDC losing its peg, DeFi protocol exploits, centralized exchanges collapsing, or even traditional bank runs we’ve seen it all. Through all of this the question remains, how do I mitigate or hedge the risk of one of these events happening?

Black swan events are, by definition, unpredictable. They can happen at a moment's notice and leave investors completely unprepared. In these situations, only investors who can react quickly can properly reallocate their assets to avoid potential downsides. Additionally, the ability to react quickly during such events can oftentimes enable investors to take advantage of unique market opportunities.  

But what about ordinary investors? Those who are not able to dedicate all of their time to monitoring the market generally feel helpless to these black swan type events. However, thanks to smart contracts and the latest DeFi innovations, that no longer needs to be the case.  

The solution to this problem is Reactive liquidity. Normally, DeFi investors hold a static portfolio of assets where each position remains the same until it is manually adjusted. This creates a massive amount of overhead for investors as they need to continually monitor their positions. Furthermore, unlike traditional markets, crypto trades 24/7 which makes constant monitoring nearly impossible to do manually. 

By utilizing Reactive Liquidity, investors can have each of their positions automatically react to market movements. Sending their funds when it’s needed to where it is needed.  

This is made possible by Mero, the protocol behind Reactive Liquidity. Mero works similarly to other DeFi protocols where users can deposit funds into a liquidity pool to earn yield. However, what makes Mero different is that after providing liquidity, users can then set customizable market triggers to their liquidity called Actions.  

THE SCOOP

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