Liquidity service provider and digital asset market maker, GSR, announced a partnership with Interhash, the mining services company and strategic partner of mining rig manufacturer, Canaan, in an updated press release, Dec. 20. The partnership aims to provide risk management solutions for Bitcoin miners on Canaan’s network, allowing them to protect against losses and earn yield on inventory.
Risk management solutions for a volatile industry
GSR will offer a customized suite of products consisting of swaps, collars, and more bespoke structured instruments from January 2020. These will provide a hedge against volatile factors such as Bitcoin price, mining difficulty, electricity and equipment costs. GSR Co-Founder, Cristian Gil explained:
“The cryptocurrency industry is more volatile than any other business area, and many participants in the ecosystem are under-hedged or outright un-hedged against adverse price action. Miners are a foundational component of the digital asset space, and have to consider many volatile factors when planning their future revenue streams.”
Hedging to become more important as the industry matures
In traditional markets, the majority of corporate players have hedging programs. With $3 billion set to be mined in 2020 at current prices, the hedging market is small compared to physical commodities markets.
However, as portfolio sizes increase and capital expenditure grows, it makes sense to consider hedging options as resources become available. Global Marketing Director of Interhash, Cora Jiang, added:
“We believe risk management will play an integral role in this industry as it matures. We are proud to partner with GSR who have substantial financial expertise in this area and a proven track record in crypto finance.”
As Cointelegraph reported, mining rig manufacturer, Canaan’s shares have dropped 40% since its November IPO.