Hedging

Hedging is a risk management strategy used in trading and investing. It involves taking an offsetting position in a related asset to mitigate potential losses from unfavorable market movements. In the context of a crypto/fiat exchange, traders might hedge by holding a combination of cryptocurrencies and fiat currencies. This can protect against volatility and adverse price shifts. By reducing risk, hedging helps maintain portfolio stability. It does not eliminate risk entirely but aims to minimize it. Effective hedging requires understanding market dynamics and selecting appropriate instruments.