New hashprice-based derivatives instrument gives Bitcoin miners another way to hedge – Cointelegraph

Hedging against downside has always been a challenge for Bitcoin BTC miners, and the current bear market is a perfect example of how energy prices and crypto market volatility can negatively impact miners profit margins and their ability to stay solvent.

Oftentimes, institutional and retail traders use BTC-, stablecoin- and U.S. dollar-settled derivatives (options and futures contracts) to create hedging strategies that mitigate downside in Bitcoin price, and now an instrument specific to Bitcoin mining is available to miners.

The Oct. 10 launch of Luxor Hashprice NDF, a non-deliverable forward contract, will allow miners to hedge their exposure to Bitcoin price and the energy costs associated with mining.

According to Luxor Technologies, hashprice is the revenue BTC miners earn per unit of hash rate, which is the total computational power deployed by miners processing transactions on a proof-of-work network.

The over-the-counter derivatives contracts are settled using Luxors Bitcoin Hashprice Index, and investors can choose to settle in dollar-pegged stablecoins, dollars or BTC. A primary benefit of the instrument is that contract sellers can lock in Bitcoin mining revenue, while contract buyers can tap into the upside potential of Bitcoin mining without the need for physical exposure.

Related: Will the Bitcoin mining industry collapse? Analysts explain why crisis is really opportunity

According to Luxor co-founder and CEO Nick Hansen:

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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New hashprice-based derivatives instrument gives Bitcoin miners another way to hedge - Cointelegraph